Answer
If applying a resource fails, the sync operation is marked failed; ArgoCD stops progressing further waves and reports the error on the resource. With retry configured it backs off and retries. Already-applied resources remain; you fix the cause (manifest error, RBAC, missing CRD) and re-sync. Hooks may run failure hooks if defined.
Real-world example A sync fails because a manifest references a missing CRD; ArgoCD reports the error, and after installing the CRD the re-sync succeeds.