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While using contentreference datatype for embedding image, the contentfragment component is just printing the path rather embedding an image in AEM as cloud service.
Does content fragment component need customization to achieve this?
that's correct. you have to customize it as per your presentation need, and the best way to achieve it through styling system as OOTB component already have it available.
refer this conversation for help reg styling - https://experienceleaguecommunities.adobe.com/t5/adobe-experience-manager/apply-css-styling-in-conte...