I am guessing that is the bottom of the material and it did not cut all the way through. That happens because the laser diode dot is actually rectangular. The Yaxis is longer than the Xaxis, so it has less concentrated light intensity.
The simple solution is more power, slower speed (both not preferred) or multiple passes. Cutting through a material in a single pass is just for show and is not practical. Multiple passes result in less charring and often is actually faster.
How many passes you ask? That depends on the material. I cut 3mm Baltic ply with a 10w laser at 700mm/m, 70% power, and typically 3-5 passes.
My statement on settings was for 2.8mm (“3mm”) Baltic Birch plywood to be exact. Your picture shows MDF, not plywood. Settings will be different, but “multiple passes” still applies.
If cutting squares is what you’re after, rotating them 45 degrees may give you more consistent results, versus what you’re seeing by cutting along the x and y axes independently, due to the laser geometry @MikeyH notes.