Figured out what the issue was. Screenshots folder was not found because it was never created during build. The reason for that was because in package.json the script was '"cypress:run": "cypress run".

I replaced it with "cypress:run": "npx cypress run", and it works just fine.

The replaced script let cypress create screenshots folder by default.

Here is the snippet from package.json

"scripts": {
"cypress:open": "cypress open",
"cypress:run": "npx cypress run", ---> This creates screenshot file by default
"test": "echo \"Error: no test specified\" && exit 1"

},