Update: Android Gradle Plugin 3.5.0 fixes this. See this issue and this one issue, both fixed.
(Unfortunately, in my project, this other issue still remains even in 3.5.3.)
I started getting the same error after updating a (company internal) library dependency, but then I kept getting it even after reverting that update. Very strange!
> Task :app:transformClassesAndResourcesWithR8ForBetaRelease FAILED
R8 is the new Android code shrinker. If you experience any issues, please file a bug at
https://issuetracker.google.com, using 'Shrinker (R8)' as component name. You can
disable R8 by updating gradle.properties with 'android.enableR8=false'.
.../transforms/FirebasePerformancePlugin/beta/release/66/module-info.class:
D8: Unsupported source file type
The only thing I found that helped was to do what the Gradle build output says and temporarily switch back to ProGuard, with:
android.enableR8=false
in gradle.properties
.