But kudos for Amazon for furthering the datacenter-is-the-computer approach. It is simply the right thing to do.
Also, CS hardly owns the greek letter lambda, it like many greek letters has been used for many products and features over the years. Delta is an airline, but they're doing OK, among others. I am just curious what your issue with this is, and if you can come up with some concrete scenarios where this could really confuse people.
Naming the product something that closely resembles its functionality seems like a great idea for a product. It's still Amazon Lambda, and I think it's very unlikely that people will simply refer to it as "Lambda." If CS students find themselves hopelessly confused by this product name, they are going to have a real hard time tying their own shoes.
If you search for Y Combinator, luckily, https://en.wikipedia.org/wiki/Y_combinator still shows up on the first page of results, I expect the same will be true for Lambda, so I can confidently say we won't lose a generation of CS students to this faux pas.
And, as I've noticed in the past, searching for "y combinator" + any language name will often keep useful results away until you finally block this site. I'm not sure if this is still comprehensively true, but it seemed so to me at one point. So there is a very real impact on search results that can happen.
If you tried to sell ecommerce software under the name Amazon, you would get a cease-and-desist very quickly.
As someone who does use AWS a lot and lambda functions, then yes, overloading the term is dumb. I'll also probably end up using Lambda functions.
But I think it is simply named after the functional language feature. The core concept of this service is function.
Amazon has a LOT of services, and the better the naming scheme they use, the easier it will be to remember what they each are. I'm genuinely happy that they used a name that will make it trivial to map the function (heh) it serves in my head.