How do I update the PHP on AWS Lightsail?

Lightsail is a regular VM. That means that you can login to it and update the software. The method depends on what OS you chose for your VM when creating your instance. Note that there are images for lightsail that include Wordpress pre-configured which of course is a lot simpler.

You have two general options:

1. Create a newer WordPress instance and transfer the content (the latest WP instances run PHP 8) https://lightsail.aws.amazon.com/ls/docs/en_us/articles/migrate-your-wordpress-blog-to-amazon-lightsail
2. Create an instance snapshot and use apt-get to upgrade to a newer version of PHP on the instance.

Migrating your content to a new instance is likely the safest route because you can export the content and test on the new instance before pointing the Static IP to the new instance (or updating the DNS record, but we recommend you configure a Static IP so you have more options in the future). It may require fiddling with some settings or using a 3rd party plugin if you have a lot of embedded images/media. The other advantage to this approach is that all the system software will be more up-to-date and tested together.