That looks worth treating as a buyer-facing clarity bug, not just an admin display preference. If the variant name disappears, shoppers who cannot distinguish the swatch color, use a screen reader, or are comparing similar colors lose the confirmation they need before adding to cart.
Until Square changes the display, I would keep any buying-critical option on text-only. If the color cue matters visually, put the color name in the option value itself or in the product copy right beside the selector, then run one mobile test from product page to cart to confirm the selected variant name still appears after add-to-cart. That last step matters because the cart is where a shopper catches "did I pick the right one?" before paying.
Your screenshots are useful. I would also add whether this happens on mobile and desktop and whether the selected option text appears in cart/checkout. That gives Square enough detail to separate a storefront display issue from a full variant-selection issue.
