IME, water itself doesn't do the damage, its not good for gun operation/consistency, but most guns don't have many steel/iron parts that will rust with a little water.
Problem is, that water stays in the tube, plenum, valve, etc, and after a while in the right conditions algae/mold/fungus grows, when growing some forms give of acidic/caustic waste that attacks o-rings and if left long enough it can attack alum parts and other softer parts. It takes a while in the right conditions to grow, maybe years.
So if you take apart your gun and it smells like a weasyanna bayou, time to disinfect/clean it... .
Might want to do a search here for filters/driers and proper compressor setup to avoid moisture contamination...
jmo