AquaDefense applied properly? Here's a start.

Nope, drywall is not suitable even with AquaDefense applied. That needs to be applied over a cement board. The drywall manufacturers do not warrant their products in a shower with a topical waterproofing, membrane yes. But if this is a developer or tract home you will have zero chance to fight it as that is their typical MO as it is less expensive. Custom, up to you if it is a hill to die on.

Many years ago tilesetters refused jobs when I suggested drywall with Kerdi Schulter membrane. Now it's the standard. When Fine Homebuilding endorses AquaDefense, I'll consider it.

The 2021 International Residential Code, which forms the core of most statewide building codes, restricts the type of backer boards which can be used in tub and shower areas to those listed in table R702.4.2 Glass mat gypsum backing panels or fiber-reinforced gypsum panels are allowed, but I doubt you have either of those. When in doubt, check with your local building inspector.

As Tim said, U.S. code (IRC is either verbatim or the basis everywhere) does not allow paper-faced drywall products behind tile in a shower surround. Period, doesn't matter if grey, green, or purple paper.

A lot of people hide behind "well the manufacturer says their product can be applied to drywall (see Schluter, et al) so nah nah nah," but that doesn't mean the substrate was correct to begin with. Really, it is just common sense to not use any type of gypsum material, as water doesn't only hit the face of tile, it can leak behind, get to edges at the escutcheons or at the tub flange. Wet gypsum is mush and paper becomes moldy.

Heck to the no.

Mapei recommends AquaDefense over gypsum wallboard although only in "approved application areas only", however, they don't say what those areas are.

Pretty disappointed this is what my builder did.. I have to pick my battles as there are many.. Thanks guys.

OP, this is probably a battle you should pick.

"Pretty disappointed this is what my builder did.. I have to pick my battles as there are many."

What sort of build (custom, tract)? What sort of contract?

Buy more and apply another thick coat.

Are you sure it's drywall? From the photo, the tile area looks "different" like it could be backer board (or it could just be that they didn't prime that area).

If it's drywall, greenboard or similar - it's an "oh hell no!"

You are talking a ~$100 difference in materials to do it right (GoBoard is $25 a 3x5 sheet) and it doesn't require the cost of AquaDefense or the labor to apply it - so installed costs are considerably less than $100 difference (perhaps even $0).

That wall will fall apart in a couple of years if it's any version of drywall - then you are talking about water damage, mold and a complete rip out and redo.