diff --git a/lib/crewai/src/crewai/cli/plus_api.py b/lib/crewai/src/crewai/cli/plus_api.py
index e32e5220d..665221f1e 100644
--- a/lib/crewai/src/crewai/cli/plus_api.py
+++ b/lib/crewai/src/crewai/cli/plus_api.py
@@ -196,6 +196,16 @@ class PlusAPI:
             timeout=30,
         )
 
+    def mark_ephemeral_trace_batch_as_failed(
+        self, trace_batch_id: str, error_message: str
+    ) -> httpx.Response:
+        return self._make_request(
+            "PATCH",
+            f"{self.EPHEMERAL_TRACING_RESOURCE}/batches/{trace_batch_id}",
+            json={"status": "failed", "failure_reason": error_message},
+            timeout=30,
+        )
+
     def get_mcp_configs(self, slugs: list[str]) -> httpx.Response:
         """Get MCP server configurations for the given slugs."""
         return self._make_request(
diff --git a/lib/crewai/src/crewai/events/listeners/tracing/first_time_trace_handler.py b/lib/crewai/src/crewai/events/listeners/tracing/first_time_trace_handler.py
index 715642a6e..436d50c27 100644
--- a/lib/crewai/src/crewai/events/listeners/tracing/first_time_trace_handler.py
+++ b/lib/crewai/src/crewai/events/listeners/tracing/first_time_trace_handler.py
@@ -1,3 +1,4 @@
+from datetime import datetime, timezone
 import logging
 import uuid
 import webbrowser
@@ -100,20 +101,50 @@ class FirstTimeTraceHandler:
                     user_context=user_context,
                     execution_metadata=execution_metadata,
                     use_ephemeral=True,
+                    skip_context_check=True,
                 )
+
+                if not self.batch_manager.trace_batch_id:
+                    self._gracefully_fail(
+                        "Backend batch creation failed, cannot send events."
+                    )
+                    self._reset_batch_state()
+                    return
+
                 self.batch_manager.backend_initialized = True
 
-            if self.batch_manager.event_buffer:
-                self.batch_manager._send_events_to_backend()
+            # Capture values before send/finalize consume them
+            events_count = len(self.batch_manager.event_buffer)
+            batch_id = self.batch_manager.trace_batch_id
+            # Read duration non-destructively — _finalize_backend_batch will consume it
+            start_time = self.batch_manager.execution_start_times.get("execution")
+            duration_ms = (
+                int((datetime.now(timezone.utc) - start_time).total_seconds() * 1000)
+                if start_time
+                else 0
+            )
 
-            self.batch_manager.finalize_batch()
+            if self.batch_manager.event_buffer:
+                send_status = self.batch_manager._send_events_to_backend()
+                if send_status == 500 and self.batch_manager.trace_batch_id:
+                    self.batch_manager._mark_batch_as_failed(
+                        self.batch_manager.trace_batch_id,
+                        "Error sending events to backend",
+                    )
+                    self._reset_batch_state()
+                    return
+
+            self.batch_manager._finalize_backend_batch(events_count)
             self.ephemeral_url = self.batch_manager.ephemeral_trace_url
 
             if not self.ephemeral_url:
-                self._show_local_trace_message()
+                self._show_local_trace_message(events_count, duration_ms, batch_id)
+
+            self._reset_batch_state()
 
         except Exception as e:
             self._gracefully_fail(f"Backend initialization failed: {e}")
+            self._reset_batch_state()
 
     def _display_ephemeral_trace_link(self) -> None:
         """Display the ephemeral trace link to the user and automatically open browser."""
@@ -185,6 +216,19 @@ To enable tracing later, do any one of these:
         console.print(panel)
         console.print()
 
+    def _reset_batch_state(self) -> None:
+        """Reset batch manager state to allow future executions to re-initialize."""
+        if not self.batch_manager:
+            return
+        self.batch_manager.batch_owner_type = None
+        self.batch_manager.batch_owner_id = None
+        self.batch_manager.current_batch = None
+        self.batch_manager.event_buffer.clear()
+        self.batch_manager.trace_batch_id = None
+        self.batch_manager.is_current_batch_ephemeral = False
+        self.batch_manager.backend_initialized = False
+        self.batch_manager._cleanup_batch_data()
+
     def _gracefully_fail(self, error_message: str) -> None:
         """Handle errors gracefully without disrupting user experience."""
         console = Console()
@@ -192,7 +236,9 @@ To enable tracing later, do any one of these:
 
         logger.debug(f"First-time trace error: {error_message}")
 
-    def _show_local_trace_message(self) -> None:
+    def _show_local_trace_message(
+        self, events_count: int = 0, duration_ms: int = 0, batch_id: str | None = None
+    ) -> None:
         """Show message when traces were collected locally but couldn't be uploaded."""
         if self.batch_manager is None:
             return
@@ -203,9 +249,9 @@ To enable tracing later, do any one of these:
 📊 Your execution traces were collected locally!
 
 Unfortunately, we couldn't upload them to the server right now, but here's what we captured:
-• {len(self.batch_manager.event_buffer)} trace events
-• Execution duration: {self.batch_manager.calculate_duration("execution")}ms
-• Batch ID: {self.batch_manager.trace_batch_id}
+• {events_count} trace events
+• Execution duration: {duration_ms}ms
+• Batch ID: {batch_id}
 
 ✅ Tracing has been enabled for future runs!
 Your preference has been saved. Future Crew/Flow executions will automatically collect traces.
diff --git a/lib/crewai/src/crewai/events/listeners/tracing/trace_batch_manager.py b/lib/crewai/src/crewai/events/listeners/tracing/trace_batch_manager.py
index da25792fb..1a25b68a9 100644
--- a/lib/crewai/src/crewai/events/listeners/tracing/trace_batch_manager.py
+++ b/lib/crewai/src/crewai/events/listeners/tracing/trace_batch_manager.py
@@ -2,6 +2,7 @@ from dataclasses import dataclass, field
 from datetime import datetime, timezone
 from logging import getLogger
 from threading import Condition, Lock
+import time
 from typing import Any
 import uuid
 
@@ -98,7 +99,7 @@ class TraceBatchManager:
                 self._initialize_backend_batch(
                     user_context, execution_metadata, use_ephemeral
                 )
-                self.backend_initialized = True
+                self.backend_initialized = self.trace_batch_id is not None
 
             self._batch_ready_cv.notify_all()
             return self.current_batch
@@ -108,14 +109,15 @@ class TraceBatchManager:
         user_context: dict[str, str],
         execution_metadata: dict[str, Any],
         use_ephemeral: bool = False,
+        skip_context_check: bool = False,
     ) -> None:
         """Send batch initialization to backend"""
 
-        if not is_tracing_enabled_in_context():
-            return
+        if not skip_context_check and not is_tracing_enabled_in_context():
+            return None
 
         if not self.plus_api or not self.current_batch:
-            return
+            return None
 
         try:
             payload = {
@@ -142,19 +144,53 @@ class TraceBatchManager:
                 payload["ephemeral_trace_id"] = self.current_batch.batch_id
                 payload["user_identifier"] = get_user_id()
 
-            response = (
-                self.plus_api.initialize_ephemeral_trace_batch(payload)
-                if use_ephemeral
-                else self.plus_api.initialize_trace_batch(payload)
-            )
+            max_retries = 1
+            response = None
+
+            try:
+                for attempt in range(max_retries + 1):
+                    response = (
+                        self.plus_api.initialize_ephemeral_trace_batch(payload)
+                        if use_ephemeral
+                        else self.plus_api.initialize_trace_batch(payload)
+                    )
+                    if response is not None and response.status_code < 500:
+                        break
+                    if attempt < max_retries:
+                        logger.debug(
+                            f"Trace batch init attempt {attempt + 1} failed "
+                            f"(status={response.status_code if response else 'None'}), retrying..."
+                        )
+                        time.sleep(0.2)
+            except Exception as e:
+                logger.warning(
+                    f"Error initializing trace batch: {e}. Continuing without tracing."
+                )
+                self.trace_batch_id = None
+                return None
 
             if response is None:
                 logger.warning(
                     "Trace batch initialization failed gracefully. Continuing without tracing."
                 )
-                return
+                self.trace_batch_id = None
+                return None
+
+            # Fall back to ephemeral on auth failure (expired/revoked token)
+            if response.status_code in [401, 403] and not use_ephemeral:
+                logger.warning(
+                    "Auth rejected by server, falling back to ephemeral tracing."
+                )
+                self.is_current_batch_ephemeral = True
+                return self._initialize_backend_batch(
+                    user_context,
+                    execution_metadata,
+                    use_ephemeral=True,
+                    skip_context_check=skip_context_check,
+                )
 
             if response.status_code in [201, 200]:
+                self.is_current_batch_ephemeral = use_ephemeral
                 response_data = response.json()
                 self.trace_batch_id = (
                     response_data["trace_id"]
@@ -165,11 +201,22 @@ class TraceBatchManager:
                 logger.warning(
                     f"Trace batch initialization returned status {response.status_code}. Continuing without tracing."
                 )
+                self.trace_batch_id = None
 
         except Exception as e:
             logger.warning(
                 f"Error initializing trace batch: {e}. Continuing without tracing."
             )
+            self.trace_batch_id = None
+
+    def _mark_batch_as_failed(self, trace_batch_id: str, error_message: str) -> None:
+        """Mark a trace batch as failed, routing to the correct endpoint."""
+        if self.is_current_batch_ephemeral:
+            self.plus_api.mark_ephemeral_trace_batch_as_failed(
+                trace_batch_id, error_message
+            )
+        else:
+            self.plus_api.mark_trace_batch_as_failed(trace_batch_id, error_message)
 
     def begin_event_processing(self) -> None:
         """Mark that an event handler started processing (for synchronization)."""
@@ -260,7 +307,7 @@ class TraceBatchManager:
             logger.error(
                 "Event handler timeout - marking batch as failed due to incomplete events"
             )
-            self.plus_api.mark_trace_batch_as_failed(
+            self._mark_batch_as_failed(
                 self.trace_batch_id,
                 "Timeout waiting for event handlers - events incomplete",
             )
@@ -284,7 +331,7 @@ class TraceBatchManager:
             events_sent_to_backend_status = self._send_events_to_backend()
             self.event_buffer = original_buffer
             if events_sent_to_backend_status == 500 and self.trace_batch_id:
-                self.plus_api.mark_trace_batch_as_failed(
+                self._mark_batch_as_failed(
                     self.trace_batch_id, "Error sending events to backend"
                 )
                 return None
@@ -364,13 +411,16 @@ class TraceBatchManager:
                 logger.error(
                     f"❌ Failed to finalize trace batch: {response.status_code} - {response.text}"
                 )
-                self.plus_api.mark_trace_batch_as_failed(
-                    self.trace_batch_id, response.text
-                )
+                self._mark_batch_as_failed(self.trace_batch_id, response.text)
 
         except Exception as e:
             logger.error(f"❌ Error finalizing trace batch: {e}")
-            self.plus_api.mark_trace_batch_as_failed(self.trace_batch_id, str(e))
+            try:
+                self._mark_batch_as_failed(self.trace_batch_id, str(e))
+            except Exception:
+                logger.debug(
+                    "Could not mark trace batch as failed (network unavailable)"
+                )
 
     def _cleanup_batch_data(self) -> None:
         """Clean up batch data after successful finalization to free memory"""
diff --git a/lib/crewai/src/crewai/events/listeners/tracing/trace_listener.py b/lib/crewai/src/crewai/events/listeners/tracing/trace_listener.py
index b86d77aa1..9d81f1d55 100644
--- a/lib/crewai/src/crewai/events/listeners/tracing/trace_listener.py
+++ b/lib/crewai/src/crewai/events/listeners/tracing/trace_listener.py
@@ -235,8 +235,11 @@ class TraceCollectionListener(BaseEventListener):
 
         @event_bus.on(FlowStartedEvent)
         def on_flow_started(source: Any, event: FlowStartedEvent) -> None:
-            if not self.batch_manager.is_batch_initialized():
-                self._initialize_flow_batch(source, event)
+            # Always call _initialize_flow_batch to claim ownership.
+            # If batch was already initialized by a concurrent action event
+            # (race condition), initialize_batch() returns early but
+            # batch_owner_type is still correctly set to "flow".
+            self._initialize_flow_batch(source, event)
             self._handle_trace_event("flow_started", source, event)
 
         @event_bus.on(MethodExecutionStartedEvent)
@@ -266,7 +269,12 @@ class TraceCollectionListener(BaseEventListener):
 
         @event_bus.on(CrewKickoffStartedEvent)
         def on_crew_started(source: Any, event: CrewKickoffStartedEvent) -> None:
-            if not self.batch_manager.is_batch_initialized():
+            if self.batch_manager.batch_owner_type != "flow":
+                # Always call _initialize_crew_batch to claim ownership.
+                # If batch was already initialized by a concurrent action event
+                # (race condition with DefaultEnvEvent), initialize_batch() returns
+                # early but batch_owner_type is still correctly set to "crew".
+                # Skip only when a parent flow already owns the batch.
                 self._initialize_crew_batch(source, event)
             self._handle_trace_event("crew_kickoff_started", source, event)
 
@@ -772,7 +780,7 @@ class TraceCollectionListener(BaseEventListener):
                 "crew_name": getattr(source, "name", "Unknown Crew"),
                 "crewai_version": get_crewai_version(),
             }
-            self.batch_manager.initialize_batch(user_context, execution_metadata)
+            self._initialize_batch(user_context, execution_metadata)
 
         self.batch_manager.begin_event_processing()
         try:
diff --git a/lib/crewai/src/crewai/events/utils/console_formatter.py b/lib/crewai/src/crewai/events/utils/console_formatter.py
index 0984406e9..7879a4d93 100644
--- a/lib/crewai/src/crewai/events/utils/console_formatter.py
+++ b/lib/crewai/src/crewai/events/utils/console_formatter.py
@@ -127,6 +127,9 @@ To update, run: uv sync --upgrade-package crewai"""
 
     def _show_tracing_disabled_message_if_needed(self) -> None:
         """Show tracing disabled message if tracing is not enabled."""
+        from crewai.events.listeners.tracing.trace_listener import (
+            TraceCollectionListener,
+        )
         from crewai.events.listeners.tracing.utils import (
             has_user_declined_tracing,
             is_tracing_enabled_in_context,
@@ -136,6 +139,12 @@ To update, run: uv sync --upgrade-package crewai"""
         if should_suppress_tracing_messages():
             return
 
+        # Don't show "disabled" message when the first-time handler will show
+        # the trace prompt after execution completes (avoids confusing mid-flow messages)
+        listener = TraceCollectionListener._instance  # type: ignore[misc]
+        if listener and listener.first_time_handler.is_first_time:
+            return
+
         if not is_tracing_enabled_in_context():
             if has_user_declined_tracing():
                 message = """Info: Tracing is disabled.
diff --git a/lib/crewai/tests/tracing/test_tracing.py b/lib/crewai/tests/tracing/test_tracing.py
index c2558c17c..92f6e31c5 100644
--- a/lib/crewai/tests/tracing/test_tracing.py
+++ b/lib/crewai/tests/tracing/test_tracing.py
@@ -7,6 +7,7 @@ from crewai.events.listeners.tracing.first_time_trace_handler import (
     FirstTimeTraceHandler,
 )
 from crewai.events.listeners.tracing.trace_batch_manager import (
+    TraceBatch,
     TraceBatchManager,
 )
 from crewai.events.listeners.tracing.trace_listener import (
@@ -657,6 +658,16 @@ class TestTraceListenerSetup:
 
             trace_listener.first_time_handler.collected_events = True
 
+            mock_batch_response = MagicMock()
+            mock_batch_response.status_code = 201
+            mock_batch_response.json.return_value = {
+                "trace_id": "mock-trace-id",
+                "ephemeral_trace_id": "mock-ephemeral-trace-id",
+                "access_code": "TRACE-mock",
+            }
+            mock_events_response = MagicMock()
+            mock_events_response.status_code = 200
+
             with (
                 patch.object(
                     trace_listener.first_time_handler,
@@ -666,6 +677,40 @@ class TestTraceListenerSetup:
                 patch.object(
                     trace_listener.first_time_handler, "_display_ephemeral_trace_link"
                 ) as mock_display_link,
+                patch.object(
+                    trace_listener.batch_manager.plus_api,
+                    "initialize_trace_batch",
+                    return_value=mock_batch_response,
+                ),
+                patch.object(
+                    trace_listener.batch_manager.plus_api,
+                    "initialize_ephemeral_trace_batch",
+                    return_value=mock_batch_response,
+                ),
+                patch.object(
+                    trace_listener.batch_manager.plus_api,
+                    "send_trace_events",
+                    return_value=mock_events_response,
+                ),
+                patch.object(
+                    trace_listener.batch_manager.plus_api,
+                    "send_ephemeral_trace_events",
+                    return_value=mock_events_response,
+                ),
+                patch.object(
+                    trace_listener.batch_manager.plus_api,
+                    "finalize_trace_batch",
+                    return_value=mock_events_response,
+                ),
+                patch.object(
+                    trace_listener.batch_manager.plus_api,
+                    "finalize_ephemeral_trace_batch",
+                    return_value=mock_events_response,
+                ),
+                patch.object(
+                    trace_listener.batch_manager,
+                    "_cleanup_batch_data",
+                ),
             ):
                 crew.kickoff()
                 wait_for_event_handlers()
@@ -918,3 +963,676 @@ class TestTraceListenerSetup:
                 mock_init.assert_called_once()
                 payload = mock_init.call_args[0][0]
                 assert "user_identifier" not in payload
+
+
+class TestTraceBatchIdClearedOnFailure:
+    """Tests: trace_batch_id is cleared when _initialize_backend_batch fails."""
+
+    def _make_batch_manager(self):
+        """Create a TraceBatchManager with a pre-set trace_batch_id (simulating first-time user)."""
+        with patch(
+            "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+            return_value="mock_token",
+        ):
+            bm = TraceBatchManager()
+        bm.current_batch = TraceBatch(
+            user_context={"privacy_level": "standard"},
+            execution_metadata={"execution_type": "crew", "crew_name": "test"},
+        )
+        bm.trace_batch_id = bm.current_batch.batch_id  # simulate line 96
+        bm.is_current_batch_ephemeral = True
+        return bm
+
+    def test_trace_batch_id_cleared_on_exception(self):
+        """trace_batch_id must be None when the API call raises an exception."""
+        bm = self._make_batch_manager()
+        assert bm.trace_batch_id is not None
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                side_effect=ConnectionError("network down"),
+            ),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id is None
+
+    def test_trace_batch_id_set_on_success(self):
+        """trace_batch_id must be set from the server response on success."""
+        bm = self._make_batch_manager()
+        server_id = "server-ephemeral-trace-id-999"
+
+        mock_response = MagicMock(
+            status_code=201,
+            json=MagicMock(return_value={"ephemeral_trace_id": server_id}),
+        )
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=mock_response,
+            ),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id == server_id
+
+    def test_send_events_skipped_when_trace_batch_id_none(self):
+        """_send_events_to_backend must return early when trace_batch_id is None."""
+        bm = self._make_batch_manager()
+        bm.trace_batch_id = None
+        bm.event_buffer = [MagicMock()]  # has events
+
+        with patch.object(
+            bm.plus_api, "send_ephemeral_trace_events"
+        ) as mock_send:
+            result = bm._send_events_to_backend()
+
+        assert result == 500
+        mock_send.assert_not_called()
+
+
+class TestInitializeBackendBatchRetry:
+    """Tests for retry logic in _initialize_backend_batch."""
+
+    def _make_batch_manager(self):
+        """Create a TraceBatchManager with a pre-set trace_batch_id."""
+        with patch(
+            "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+            return_value="mock_token",
+        ):
+            bm = TraceBatchManager()
+        bm.current_batch = TraceBatch(
+            user_context={"privacy_level": "standard"},
+            execution_metadata={"execution_type": "crew", "crew_name": "test"},
+        )
+        bm.trace_batch_id = bm.current_batch.batch_id
+        bm.is_current_batch_ephemeral = True
+        return bm
+
+    def test_retries_on_none_response_then_succeeds(self):
+        """Retries when API returns None, succeeds on second attempt."""
+        bm = self._make_batch_manager()
+        server_id = "server-id-after-retry"
+
+        success_response = MagicMock(
+            status_code=201,
+            json=MagicMock(return_value={"ephemeral_trace_id": server_id}),
+        )
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                side_effect=[None, success_response],
+            ) as mock_init,
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep") as mock_sleep,
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id == server_id
+        assert mock_init.call_count == 2
+        mock_sleep.assert_called_once_with(0.2)
+
+    def test_retries_on_5xx_then_succeeds(self):
+        """Retries on 500 server error, succeeds on second attempt."""
+        bm = self._make_batch_manager()
+        server_id = "server-id-after-5xx"
+
+        error_response = MagicMock(status_code=500, text="Internal Server Error")
+        success_response = MagicMock(
+            status_code=201,
+            json=MagicMock(return_value={"ephemeral_trace_id": server_id}),
+        )
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                side_effect=[error_response, success_response],
+            ) as mock_init,
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep"),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id == server_id
+        assert mock_init.call_count == 2
+
+    def test_no_retry_on_exception(self):
+        """Exceptions (e.g. timeout, connection error) abort immediately without retry."""
+        bm = self._make_batch_manager()
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                side_effect=ConnectionError("network down"),
+            ) as mock_init,
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep") as mock_sleep,
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id is None
+        assert mock_init.call_count == 1
+        mock_sleep.assert_not_called()
+
+    def test_no_retry_on_4xx(self):
+        """Does NOT retry on 422 — client error is not transient."""
+        bm = self._make_batch_manager()
+
+        error_response = MagicMock(status_code=422, text="Unprocessable Entity")
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=error_response,
+            ) as mock_init,
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep") as mock_sleep,
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id is None
+        assert mock_init.call_count == 1
+        mock_sleep.assert_not_called()
+
+    def test_exhausts_retries_then_clears_batch_id(self):
+        """After all retries fail, trace_batch_id is None."""
+        bm = self._make_batch_manager()
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=None,
+            ) as mock_init,
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep"),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id is None
+        assert mock_init.call_count == 2  # initial + 1 retry
+
+
+class TestFirstTimeHandlerBackendInitGuard:
+    """Tests: backend_initialized gated on actual batch creation success."""
+
+    def _make_handler_with_manager(self):
+        """Create a FirstTimeTraceHandler wired to a TraceBatchManager."""
+        with patch(
+            "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+            return_value="mock_token",
+        ):
+            bm = TraceBatchManager()
+        bm.current_batch = TraceBatch(
+            user_context={"privacy_level": "standard"},
+            execution_metadata={"execution_type": "crew", "crew_name": "test"},
+        )
+        bm.trace_batch_id = bm.current_batch.batch_id
+        bm.is_current_batch_ephemeral = True
+
+        handler = FirstTimeTraceHandler()
+        handler.is_first_time = True
+        handler.collected_events = True
+        handler.batch_manager = bm
+        return handler, bm
+
+    def test_backend_initialized_true_on_success(self):
+        """Events are sent when batch creation succeeds, then state is cleaned up."""
+        handler, bm = self._make_handler_with_manager()
+        server_id = "server-id-abc"
+
+        mock_init_response = MagicMock(
+            status_code=201,
+            json=MagicMock(return_value={"ephemeral_trace_id": server_id}),
+        )
+        mock_send_response = MagicMock(status_code=200)
+
+        trace_batch_id_during_send = None
+
+        def capture_send(*args, **kwargs):
+            nonlocal trace_batch_id_during_send
+            trace_batch_id_during_send = bm.trace_batch_id
+            return mock_send_response
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=mock_init_response,
+            ),
+            patch.object(
+                bm.plus_api,
+                "send_ephemeral_trace_events",
+                side_effect=capture_send,
+            ),
+            patch.object(bm, "_finalize_backend_batch"),
+        ):
+            bm.event_buffer = [MagicMock(to_dict=MagicMock(return_value={}))]
+            handler._initialize_backend_and_send_events()
+
+        # trace_batch_id was set correctly during send
+        assert trace_batch_id_during_send == server_id
+        # State cleaned up after completion (singleton reuse)
+        assert bm.backend_initialized is False
+        assert bm.trace_batch_id is None
+        assert bm.current_batch is None
+
+    def test_backend_initialized_false_on_failure(self):
+        """backend_initialized stays False and events are NOT sent when batch creation fails."""
+        handler, bm = self._make_handler_with_manager()
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=None,  # server call fails
+            ),
+            patch.object(bm, "_send_events_to_backend") as mock_send,
+            patch.object(bm, "_finalize_backend_batch") as mock_finalize,
+            patch.object(handler, "_gracefully_fail") as mock_fail,
+        ):
+            bm.event_buffer = [MagicMock()]
+            handler._initialize_backend_and_send_events()
+
+        assert bm.backend_initialized is False
+        assert bm.trace_batch_id is None
+        mock_send.assert_not_called()
+        mock_finalize.assert_not_called()
+        mock_fail.assert_called_once()
+
+    def test_backend_initialized_false_on_non_2xx(self):
+        """backend_initialized stays False when server returns non-2xx."""
+        handler, bm = self._make_handler_with_manager()
+
+        mock_response = MagicMock(status_code=500, text="Internal Server Error")
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=mock_response,
+            ),
+            patch.object(bm, "_send_events_to_backend") as mock_send,
+            patch.object(bm, "_finalize_backend_batch") as mock_finalize,
+            patch.object(handler, "_gracefully_fail") as mock_fail,
+        ):
+            bm.event_buffer = [MagicMock()]
+            handler._initialize_backend_and_send_events()
+
+        assert bm.backend_initialized is False
+        assert bm.trace_batch_id is None
+        mock_send.assert_not_called()
+        mock_finalize.assert_not_called()
+        mock_fail.assert_called_once()
+
+
+class TestFirstTimeHandlerAlwaysEphemeral:
+    """Tests that first-time handler always uses ephemeral with skip_context_check."""
+
+    def _make_handler_with_manager(self):
+        with patch(
+            "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+            return_value="mock_token",
+        ):
+            bm = TraceBatchManager()
+        bm.current_batch = TraceBatch(
+            user_context={"privacy_level": "standard"},
+            execution_metadata={"execution_type": "crew", "crew_name": "test"},
+        )
+        bm.trace_batch_id = bm.current_batch.batch_id
+        bm.is_current_batch_ephemeral = True
+
+        handler = FirstTimeTraceHandler()
+        handler.is_first_time = True
+        handler.collected_events = True
+        handler.batch_manager = bm
+        return handler, bm
+
+    def test_deferred_init_uses_ephemeral_and_skip_context_check(self):
+        """Deferred backend init always uses ephemeral=True and skip_context_check=True."""
+        handler, bm = self._make_handler_with_manager()
+
+        with (
+            patch.object(bm, "_initialize_backend_batch") as mock_init,
+            patch.object(bm, "_send_events_to_backend"),
+            patch.object(bm, "_finalize_backend_batch"),
+        ):
+            mock_init.side_effect = lambda **kwargs: None
+            bm.event_buffer = [MagicMock()]
+            handler._initialize_backend_and_send_events()
+
+            mock_init.assert_called_once()
+            assert mock_init.call_args.kwargs["use_ephemeral"] is True
+            assert mock_init.call_args.kwargs["skip_context_check"] is True
+
+
+class TestAuthFailbackToEphemeral:
+    """Tests for ephemeral fallback when server rejects auth (401/403)."""
+
+    def _make_batch_manager(self):
+        """Create a TraceBatchManager with a pre-set trace_batch_id."""
+        with patch(
+            "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+            return_value="mock_token",
+        ):
+            bm = TraceBatchManager()
+        bm.current_batch = TraceBatch(
+            user_context={"privacy_level": "standard"},
+            execution_metadata={"execution_type": "crew", "crew_name": "test"},
+        )
+        bm.trace_batch_id = bm.current_batch.batch_id
+        bm.is_current_batch_ephemeral = False  # authenticated path
+        return bm
+
+    def test_401_non_ephemeral_falls_back_to_ephemeral(self):
+        """A 401 on the non-ephemeral endpoint should retry as ephemeral."""
+        bm = self._make_batch_manager()
+        server_id = "ephemeral-fallback-id"
+
+        auth_rejected = MagicMock(status_code=401, text="Bad credentials")
+        ephemeral_success = MagicMock(
+            status_code=201,
+            json=MagicMock(return_value={"ephemeral_trace_id": server_id}),
+        )
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_trace_batch",
+                return_value=auth_rejected,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=ephemeral_success,
+            ) as mock_ephemeral,
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep"),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=False,
+            )
+
+        assert bm.trace_batch_id == server_id
+        assert bm.is_current_batch_ephemeral is True
+        mock_ephemeral.assert_called_once()
+
+    def test_403_non_ephemeral_falls_back_to_ephemeral(self):
+        """A 403 on the non-ephemeral endpoint should also fall back."""
+        bm = self._make_batch_manager()
+        server_id = "ephemeral-fallback-403"
+
+        forbidden = MagicMock(status_code=403, text="Forbidden")
+        ephemeral_success = MagicMock(
+            status_code=201,
+            json=MagicMock(return_value={"ephemeral_trace_id": server_id}),
+        )
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_trace_batch",
+                return_value=forbidden,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=ephemeral_success,
+            ),
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep"),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=False,
+            )
+
+        assert bm.trace_batch_id == server_id
+        assert bm.is_current_batch_ephemeral is True
+
+    def test_401_on_ephemeral_does_not_recurse(self):
+        """A 401 on the ephemeral endpoint should NOT try to fall back again."""
+        bm = self._make_batch_manager()
+        bm.is_current_batch_ephemeral = True
+
+        auth_rejected = MagicMock(status_code=401, text="Bad credentials")
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=auth_rejected,
+            ) as mock_ephemeral,
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep"),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=True,
+            )
+
+        assert bm.trace_batch_id is None
+        # Called only once — no recursive fallback
+        mock_ephemeral.assert_called()
+
+    def test_401_fallback_ephemeral_also_fails(self):
+        """If ephemeral fallback also fails, trace_batch_id is cleared."""
+        bm = self._make_batch_manager()
+
+        auth_rejected = MagicMock(status_code=401, text="Bad credentials")
+        ephemeral_fail = MagicMock(status_code=422, text="Validation failed")
+
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_trace_batch",
+                return_value=auth_rejected,
+            ),
+            patch.object(
+                bm.plus_api,
+                "initialize_ephemeral_trace_batch",
+                return_value=ephemeral_fail,
+            ),
+            patch("crewai.events.listeners.tracing.trace_batch_manager.time.sleep"),
+        ):
+            bm._initialize_backend_batch(
+                user_context={"privacy_level": "standard"},
+                execution_metadata={"execution_type": "crew"},
+                use_ephemeral=False,
+            )
+
+        assert bm.trace_batch_id is None
+
+
+class TestMarkBatchAsFailedRouting:
+    """Tests: _mark_batch_as_failed routes to the correct endpoint."""
+
+    def _make_batch_manager(self, ephemeral: bool = False):
+        with patch(
+            "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+            return_value="mock_token",
+        ):
+            bm = TraceBatchManager()
+        bm.is_current_batch_ephemeral = ephemeral
+        return bm
+
+    def test_routes_to_ephemeral_endpoint_when_ephemeral(self):
+        """Ephemeral batches must use mark_ephemeral_trace_batch_as_failed."""
+        bm = self._make_batch_manager(ephemeral=True)
+
+        with patch.object(
+            bm.plus_api, "mark_ephemeral_trace_batch_as_failed"
+        ) as mock_ephemeral, patch.object(
+            bm.plus_api, "mark_trace_batch_as_failed"
+        ) as mock_non_ephemeral:
+            bm._mark_batch_as_failed("batch-123", "some error")
+
+        mock_ephemeral.assert_called_once_with("batch-123", "some error")
+        mock_non_ephemeral.assert_not_called()
+
+    def test_routes_to_non_ephemeral_endpoint_when_not_ephemeral(self):
+        """Non-ephemeral batches must use mark_trace_batch_as_failed."""
+        bm = self._make_batch_manager(ephemeral=False)
+
+        with patch.object(
+            bm.plus_api, "mark_ephemeral_trace_batch_as_failed"
+        ) as mock_ephemeral, patch.object(
+            bm.plus_api, "mark_trace_batch_as_failed"
+        ) as mock_non_ephemeral:
+            bm._mark_batch_as_failed("batch-456", "another error")
+
+        mock_non_ephemeral.assert_called_once_with("batch-456", "another error")
+        mock_ephemeral.assert_not_called()
+
+
+class TestBackendInitializedGatedOnSuccess:
+    """Tests: backend_initialized reflects actual init success on non-first-time path."""
+
+    def test_backend_initialized_true_on_success(self):
+        """backend_initialized is True when _initialize_backend_batch succeeds."""
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.should_auto_collect_first_time_traces",
+                return_value=False,
+            ),
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+                return_value="mock_token",
+            ),
+        ):
+            bm = TraceBatchManager()
+            mock_response = MagicMock(
+                status_code=201,
+                json=MagicMock(return_value={"trace_id": "server-id"}),
+            )
+            with patch.object(
+                bm.plus_api, "initialize_trace_batch", return_value=mock_response
+            ):
+                bm.initialize_batch(
+                    user_context={"privacy_level": "standard"},
+                    execution_metadata={"execution_type": "crew"},
+                )
+
+        assert bm.backend_initialized is True
+        assert bm.trace_batch_id == "server-id"
+
+    def test_backend_initialized_false_on_failure(self):
+        """backend_initialized is False when _initialize_backend_batch fails."""
+        with (
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.is_tracing_enabled_in_context",
+                return_value=True,
+            ),
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.should_auto_collect_first_time_traces",
+                return_value=False,
+            ),
+            patch(
+                "crewai.events.listeners.tracing.trace_batch_manager.get_auth_token",
+                return_value="mock_token",
+            ),
+        ):
+            bm = TraceBatchManager()
+            with patch.object(
+                bm.plus_api, "initialize_trace_batch", return_value=None
+            ):
+                bm.initialize_batch(
+                    user_context={"privacy_level": "standard"},
+                    execution_metadata={"execution_type": "crew"},
+                )
+
+        assert bm.backend_initialized is False
+        assert bm.trace_batch_id is None