That's what I thought at first too, but the Bilstein is plenty long enough to handle the suspension at full droop.

It looks like it was peeled open from extension, but it is happening under compression, since the force on the shock is not vertical, but at an angle.
Side force is put on the eye at that angle, and it splits open at the weld. It then opens itself up as the shock extends itself over time. It takes a while for the eye to fully open up like in the picture.

Another thought is maybe I had 2 defective shocks. The 2 broken shocks were a pair last year.