When Lava is adjacent to a water source block that normally would not flow into it, the lava is still turned into obsidian. However, the same is not true for powder snow, which would normally get deleted by the water, but, since the water does not flow into it, remains intact.
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This was once reported in MC-210669 and marked as Invalid.
Water will actually replace powder snow as it should, however with the setup you have here, the water flows downwards as this is how water physics work. This is not an issue.