diff --git a/server/src/__tests__/environment-custom-images-service.test.ts b/server/src/__tests__/environment-custom-images-service.test.ts
index ae0e10dd8bf..86c8d487d0e 100644
--- a/server/src/__tests__/environment-custom-images-service.test.ts
+++ b/server/src/__tests__/environment-custom-images-service.test.ts
@@ -459,6 +459,43 @@ describeEmbeddedPostgres("environmentCustomImageService", () => {
     });
   });
 
+  it("does not rewrite generic missing image setup failures as template conflicts", async () => {
+    const { environmentId } = await seed();
+    const workerManager = createWorkerManager();
+    workerManager.call.mockImplementation(async (_pluginId, method) => {
+      if (method === "environmentStartInteractiveSetup") {
+        throw new Error("Base image not found in registry");
+      }
+      throw new Error(`Unexpected plugin call: ${method}`);
+    });
+    const service = environmentCustomImageService(db, { pluginWorkerManager: workerManager });
+    const [template] = await db.insert(environmentCustomImageTemplates).values({
+      environmentId,
+      provider: "fake-plugin",
+      templateKind: "snapshot",
+      templateRef: "snapshot-valid",
+      status: "active",
+    }).returning();
+
+    await expect(service.startSetupSession({
+      environmentId,
+      templateId: template!.id,
+      actor: { userId: "user-1" },
+    })).rejects.toThrow("Base image not found in registry");
+
+    const [session] = await db
+      .select({
+        status: environmentCustomImageSetupSessions.status,
+        failureReason: environmentCustomImageSetupSessions.failureReason,
+      })
+      .from(environmentCustomImageSetupSessions)
+      .where(eq(environmentCustomImageSetupSessions.templateId, template!.id));
+    expect(session).toEqual({
+      status: "failed",
+      failureReason: "Base image not found in registry",
+    });
+  });
+
   it("applies the active template regardless of base-config changes and falls back when none exists", async () => {
     const { companyId, environmentId } = await seed();
     const environment = await db.select().from(environments).where(eq(environments.id, environmentId)).then((rows) => rows[0]!);
diff --git a/server/src/services/environment-custom-images.ts b/server/src/services/environment-custom-images.ts
index f27bf8a1ffb..4191a64a929 100644
--- a/server/src/services/environment-custom-images.ts
+++ b/server/src/services/environment-custom-images.ts
@@ -192,7 +192,7 @@ function providerErrorMessage(error: unknown): string {
 function isProviderMissingTemplateError(error: unknown): boolean {
   const message = providerErrorMessage(error).toLowerCase();
   return (
-    (message.includes("snapshot") || message.includes("template") || message.includes("image"))
+    (message.includes("snapshot") || message.includes("template"))
     && (message.includes("not found") || message.includes("missing"))
   );
 }
diff --git a/ui/src/pages/CompanyEnvironments.test.tsx b/ui/src/pages/CompanyEnvironments.test.tsx
index 4b576c9c522..734e30b7985 100644
--- a/ui/src/pages/CompanyEnvironments.test.tsx
+++ b/ui/src/pages/CompanyEnvironments.test.tsx
@@ -531,6 +531,50 @@ describe("CompanyEnvironments — test provider button", () => {
     expect(container.textContent).toContain("Test probes clean up the validation sandbox after the check");
   });
 
+  it("does not show sandbox lifecycle success copy for failed sandbox provider tests", async () => {
+    root = createRoot(container);
+    const queryClient = new QueryClient({ defaultOptions: { queries: { retry: false } } });
+    mockEnvironmentsApi.list.mockResolvedValue([
+      { id: "env-1", name: "Daytona", driver: "sandbox", description: null, config: { provider: "daytona" } },
+    ]);
+    mockEnvironmentsApi.capabilities.mockResolvedValue(supportedDaytonaCapabilities());
+    mockEnvironmentsApi.probe.mockResolvedValue({
+      ok: false,
+      driver: "sandbox",
+      summary: "Daytona sandbox probe failed.",
+      details: {
+        provider: "daytona",
+        error: "Sandbox image was not found.",
+        metadata: {
+          provider: "daytona",
+          sandboxId: "473167E9",
+          sandboxName: "paperclip-probe",
+        },
+      },
+    });
+
+    await act(async () => {
+      root!.render(
+        <QueryClientProvider client={queryClient}>
+          <TooltipProvider>
+            <CompanyEnvironments />
+          </TooltipProvider>
+        </QueryClientProvider>,
+      );
+    });
+    await flushReact();
+
+    await act(async () => {
+      testProviderButtons(container)[0].dispatchEvent(new MouseEvent("click", { bubbles: true }));
+    });
+    await flushReact();
+
+    expect(container.textContent).toContain("Daytona sandbox probe failed.");
+    expect(container.textContent).toContain("Sandbox image was not found.");
+    expect(container.textContent).not.toContain("Verified temporary daytona sandbox");
+    expect(container.textContent).not.toContain("Test probes clean up the validation sandbox after the check");
+  });
+
   it("keeps the second environment's testing state when an earlier probe settles", async () => {
     root = createRoot(container);
     const queryClient = new QueryClient({ defaultOptions: { queries: { retry: false } } });
diff --git a/ui/src/pages/CompanyEnvironments.tsx b/ui/src/pages/CompanyEnvironments.tsx
index 6229d9b2820..c601a393900 100644
--- a/ui/src/pages/CompanyEnvironments.tsx
+++ b/ui/src/pages/CompanyEnvironments.tsx
@@ -215,7 +215,7 @@ function readStringValue(value: unknown): string | null {
 }
 
 function sandboxProbeLifecycleNote(probe: EnvironmentProbeResult): string | null {
-  if (probe.driver !== "sandbox") return null;
+  if (probe.driver !== "sandbox" || !probe.ok) return null;
   const metadata = readProbeMetadata(probe);
   const provider = readStringValue(metadata.provider) ?? readStringValue(readRecord(probe.details)?.provider) ?? "sandbox";
   const sandboxName = readStringValue(metadata.sandboxName);