I asked for another favicon and I'm getting the same issue with different reasoning:

 ⨯ ./src/app/favicon.ico
Processing image failed
unable to decode image data

Caused by:
- Format error decoding Ico: Entry(48, 48) and BMP(16, 16) dimensions do not match!
- Entry(48, 48) and BMP(16, 16) dimensions do not match!

The updated favicon is in the codesandbox as well.

I got this issue because my favicon file, for whatever reason, was not a valid icon. Deleting favicon.ico fixed the problem.

put it in ./public not in /app

I got the same error in version 15.0.3. I moved favicon.ico to the public folder, and it works fine now. I'm not sure what happened, as the documentation indicates it should be in the app folder:
https://nextjs.org/docs/app/api-reference/file-conventions/metadata/app-icons

Also got the same as above, putting it in /public sorts it out.

put it in ./public not in /app

Weirdly enough this works for me in Chrome / Arc, but not in Firefox and Safari

Moving the favicon.ico to the public folder works because it prevents the favicon from being injected. It is not a solution.

As most things Next15 recently, try running dev without --turbo. That was the issue for me. Turbopack is the problem here.

For now I'm putting it in public folder, because I need the turbopack.
Without turbopak, my compile time could be up to 30 seconds and sometimes it ran out of memory and need to restart the server again.
With turbopakc, it's smooth 👌

I got the same error in version 15.0.3. I moved favicon.ico to the public folder, and it works fine now. I'm not sure what happened, as the documentation indicates it should be in the app folder: https://nextjs.org/docs/app/api-reference/file-conventions/metadata/app-icons

Working fine in the app folder on version 15.2.3

Seem related to images-rs crate for turbopack (image-rs/image#1590)

I had the same problem as @Dragate

⨯ ./src/app/favicon.ico
Processing image failed
unable to decode image data

Caused by:
- Format error decoding Ico: Entry(48, 48) and BMP(16, 16) dimensions do not match!
- Entry(48, 48) and BMP(16, 16) dimensions do not match!

The issue was that the favicon didn’t have the correct dimensions. Mine was 32x32, while Next.js requires 48x48.
I fixed it by regenerating the favicon using this free online tool: https://favicon.io/
Hope this helps!

If you have the same problem that me, put your image in the folder app with the name favicon.ico and if the icon doesn't appear press Ctrl + Alt + R in Windows to reload and clean cache. This worked for me