Auto Shrinks the image despite fixed layout in FLex Container?

Question

Next IMAGE autoshrinks the image despite specifying fixed layout as you add more content to the other flex row element. Here's the example sanbox: https://codesandbox.io/s/fragrant-water-ecgqpc?file=/pages/index.js:495-513

Expected Behaviour is image size should be conserved at least in fixed layout mode, but the more text you add to the field label:

import React from "react";
import Image from "next/image";
export default function IndexPage() {
  return (
    <div>
      <div
        style={{
          width: "25rem",
          height: "10rem",
          background: "red",
          display: "flex"
        }}
      >
        <Image
          alt="Empty test"
          src="/avatar-02.jpg"
          height={160}
          width={160}
          layout="fixed"
          style={{ flexShrink: 0 }}
        />
        <label>
          Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem
          Ipsum
        </label>
      </div>
    </div>
  );
}

the smaller image becomes. Can someone help me understand why is this happening?

How it looks after resizing:

How it should actually look since the layout is fixed image with fixed height and width: