PNG in AZW?

I have an epub2 with some png images. I used Sigils's kindlegen plugin (i.e., running Amazon's program) to make an AZW (not including mobi/kf7).

Looking at the resulting AZW in calibre's viewer, it indicates the images have been converted to either gif or jpegs, with some loss of quality and larger size.

So does AZW just not support PNG? I searched for a while, but I couldn't find a definitive statement.
I'm holding out a faint hope that it's an option but not default. A bit pathetic if Amazon doesn't support png 20 years after it was released.

Otherwise, back to making gifs.