Distributed traces across AWS services are not connected

Describe the bug
We are using SQS and EventBridge to call services on AWS. However, when a service on lambda sends a message to another service on Lambda using SQS the spans are not connected. Trace on lambda becomes the parent.

Steps to reproduce
Run service 1 on lambda and send SQS message that is consumed by service 2.

What did you expect to see?
Service 1 should show up in the trace.

What did you see instead?
Only service 2 shows up

What version of collector/language SDK version did you use?
Version: latest collector and otel layers on lambda.

What language layer did you use?
Nodejs

Additional context
OTEL_PROPAGATORS are set to tracecontext,baggage,xray. Backend is Tempo.
Is there something I am missing?
I can see traceheader in the message attributes

"attributes": {
                    "ApproximateReceiveCount": "1",
                    "AWSTraceHeader": "Root=1-6808be41-c7d04735710d987017e5ec88;Parent=371ec507158784ee;Sampled=0;Lineage=240:e7ff9e16:238",
                    "SentTimestamp": "1745403457578",
                    "SenderId": "id",
                    "ApproximateFirstReceiveTimestamp": "1745403457579"
                },

Is it because I need sqsExtractContextPropagationFromPayload enabled? How could I do that without creating my own custom instrumentation layer?