For some reason android studio doesn't like calling app icon from drawable folder. So in that case I created mipmap resource directory under res folder.
Right click res folder > new > android resource directory > resource type: mipmap and now drop any icon in there then reference that into manifest file. Sharing this since this method worked for me.
android:icon:@drawable/ic_launcher"
to
android:icon="@mipmap/ic_launcher"