diff --git a/pkg/controllers/cloud_config_sync_controller.go b/pkg/controllers/cloud_config_sync_controller.go
index dc50e4acf..caa4e237f 100644
--- a/pkg/controllers/cloud_config_sync_controller.go
+++ b/pkg/controllers/cloud_config_sync_controller.go
@@ -4,6 +4,7 @@ import (
 	"context"
 	"fmt"
 	"reflect"
+	"time"
 
 	corev1 "k8s.io/api/core/v1"
 	"k8s.io/apimachinery/pkg/api/errors"
@@ -29,42 +30,50 @@ const (
 	// Controller conditions for the Cluster Operator resource
 	cloudConfigControllerAvailableCondition = "CloudConfigControllerAvailable"
 	cloudConfigControllerDegradedCondition  = "CloudConfigControllerDegraded"
+
+	// transientDegradedThreshold is how long transient errors must persist before
+	// the controller sets Degraded=True. This prevents brief
+	// API server blips during upgrades from immediately degrading the operator.
+	// Applies to both CloudConfigController and TrustedCAController.
+	transientDegradedThreshold = 2 * time.Minute
 )
 
 type CloudConfigReconciler struct {
 	ClusterOperatorStatusClient
-	Scheme            *runtime.Scheme
-	FeatureGateAccess featuregates.FeatureGateAccess
+	Scheme                  *runtime.Scheme
+	FeatureGateAccess       featuregates.FeatureGateAccess
+	consecutiveFailureSince *time.Time // nil when the last reconcile succeeded
 }
 
 func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request) (ctrl.Result, error) {
 	klog.V(1).Infof("Syncing cloud-conf ConfigMap")
 
 	infra := &configv1.Infrastructure{}
-	if err := r.Get(ctx, client.ObjectKey{Name: infrastructureResourceName}, infra); err != nil {
-		klog.Errorf("infrastructure resource not found")
-		if err := r.setDegradedCondition(ctx); err != nil {
+	if err := r.Get(ctx, client.ObjectKey{Name: infrastructureResourceName}, infra); errors.IsNotFound(err) {
+		// No cloud platform: mirror the main controller's behaviour of returning Available.
+		klog.Infof("Infrastructure cluster does not exist. Skipping...")
+		if err := r.setAvailableCondition(ctx); err != nil {
 			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
 		}
-		return ctrl.Result{}, err
+		// Skip if the infrastructure resource doesn't exist.
+		r.clearFailureWindow()
+		return ctrl.Result{}, nil
+	} else if err != nil {
+		return r.handleTransientError(ctx, err)
 	}
 
 	network := &configv1.Network{}
 	if err := r.Get(ctx, client.ObjectKey{Name: "cluster"}, network); err != nil {
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller when getting cluster Network object: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, err)
 	}
 
 	syncNeeded, err := r.isCloudConfigSyncNeeded(infra.Status.PlatformStatus, infra.Spec.CloudConfig)
 	if err != nil {
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-		}
-		return ctrl.Result{}, err
+		// nil platformStatus is a permanent misconfiguration.
+		return r.handleDegradeError(ctx, err)
 	}
 	if !syncNeeded {
+		r.clearFailureWindow()
 		if err := r.setAvailableCondition(ctx); err != nil {
 			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
 		}
@@ -74,11 +83,9 @@ func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request)
 
 	cloudConfigTransformerFn, needsManagedConfigLookup, err := cloud.GetCloudConfigTransformer(infra.Status.PlatformStatus)
 	if err != nil {
+		// Unsupported platform won't change without a cluster reconfigure.
 		klog.Errorf("unable to get cloud config transformer function; unsupported platform")
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleDegradeError(ctx, err)
 	}
 
 	sourceCM := &corev1.ConfigMap{}
@@ -101,12 +108,8 @@ func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request)
 			managedConfigFound = true
 		} else if errors.IsNotFound(err) {
 			klog.Warningf("managed cloud-config is not found, falling back to infrastructure config")
-		} else if err != nil {
-			klog.Errorf("unable to get managed cloud-config for sync")
-			if err := r.setDegradedCondition(ctx); err != nil {
-				return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-			}
-			return ctrl.Result{}, err
+		} else {
+			return r.handleTransientError(ctx, err)
 		}
 	}
 
@@ -119,38 +122,26 @@ func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request)
 		if err := r.Get(ctx, openshiftUnmanagedCMKey, sourceCM); errors.IsNotFound(err) {
 			klog.Warningf("managed cloud-config is not found, falling back to default cloud config.")
 		} else if err != nil {
-			klog.Errorf("unable to get cloud-config for sync: %v", err)
-			if err := r.setDegradedCondition(ctx); err != nil {
-				return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-			}
-			return ctrl.Result{}, err
+			return r.handleTransientError(ctx, err)
 		}
 	}
 
 	sourceCM, err = r.prepareSourceConfigMap(sourceCM, infra)
 	if err != nil {
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-		}
-		return ctrl.Result{}, err
+		// User-supplied key mismatch: permanent until the ConfigMap or Infrastructure changes.
+		return r.handleDegradeError(ctx, err)
 	}
 
-	// Check if FeatureGateAccess is configured
 	if r.FeatureGateAccess == nil {
-		klog.Errorf("FeatureGateAccess is not configured")
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-		}
-		return ctrl.Result{}, fmt.Errorf("FeatureGateAccess is not configured")
+		// Operator misconfiguration at startup: permanent.
+		return r.handleDegradeError(ctx, fmt.Errorf("FeatureGateAccess is not configured"))
 	}
 
 	features, err := r.FeatureGateAccess.CurrentFeatureGates()
 	if err != nil {
+		// The feature-gate informer may not have synced yet: transient.
 		klog.Errorf("unable to get feature gates: %v", err)
-		if errD := r.setDegradedCondition(ctx); errD != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", errD)
-		}
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, err)
 	}
 
 	if cloudConfigTransformerFn != nil {
@@ -159,10 +150,8 @@ func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request)
 		// we're not expecting users to put their data in the former.
 		output, err := cloudConfigTransformerFn(sourceCM.Data[defaultConfigKey], infra, network, features)
 		if err != nil {
-			if err := r.setDegradedCondition(ctx); err != nil {
-				return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-			}
-			return ctrl.Result{}, err
+			// Platform-specific transform failed on the current config data: permanent.
+			return r.handleDegradeError(ctx, err)
 		}
 		sourceCM.Data[defaultConfigKey] = output
 	}
@@ -175,16 +164,13 @@ func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request)
 
 	// If the config does not exist, it will be created later, so we can ignore a Not Found error
 	if err := r.Get(ctx, targetConfigMapKey, targetCM); err != nil && !errors.IsNotFound(err) {
-		klog.Errorf("unable to get target cloud-config for sync")
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, err)
 	}
 
 	// Note that the source config map is actually a *transformed* source config map
 	if r.isCloudConfigEqual(sourceCM, targetCM) {
 		klog.V(1).Infof("source and target cloud-config content are equal, no sync needed")
+		r.clearFailureWindow()
 		if err := r.setAvailableCondition(ctx); err != nil {
 			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
 		}
@@ -193,12 +179,10 @@ func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request)
 
 	if err := r.syncCloudConfigData(ctx, sourceCM, targetCM); err != nil {
 		klog.Errorf("unable to sync cloud config")
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, err)
 	}
 
+	r.clearFailureWindow()
 	if err := r.setAvailableCondition(ctx); err != nil {
 		return ctrl.Result{}, fmt.Errorf("failed to set conditions for cloud config controller: %v", err)
 	}
@@ -206,6 +190,45 @@ func (r *CloudConfigReconciler) Reconcile(ctx context.Context, req ctrl.Request)
 	return ctrl.Result{}, nil
 }
 
+// clearFailureWindow resets the transient-error tracking. Call this on every
+// successful reconcile so the 2-minute window restarts fresh on the next failure.
+func (r *CloudConfigReconciler) clearFailureWindow() {
+	r.consecutiveFailureSince = nil
+}
+
+// handleTransientError records the start of a failure window and degrades the
+// controller only after transientDegradedThreshold has elapsed. It always
+// returns a non-nil error so controller-runtime requeues with exponential backoff.
+func (r *CloudConfigReconciler) handleTransientError(ctx context.Context, err error) (ctrl.Result, error) {
+	now := r.Clock.Now()
+	if r.consecutiveFailureSince == nil {
+		r.consecutiveFailureSince = &now
+		klog.V(4).Infof("CloudConfigReconciler: transient failure started (%v), will degrade after %s", err, transientDegradedThreshold)
+		return ctrl.Result{}, err
+	}
+	elapsed := r.Clock.Now().Sub(*r.consecutiveFailureSince)
+	if elapsed < transientDegradedThreshold {
+		klog.V(4).Infof("CloudConfigReconciler: transient failure ongoing for %s (threshold %s): %v", elapsed, transientDegradedThreshold, err)
+		return ctrl.Result{}, err
+	}
+	klog.Warningf("CloudConfigReconciler: transient failure exceeded threshold (%s), setting degraded: %v", elapsed, err)
+	if setErr := r.setDegradedCondition(ctx); setErr != nil {
+		return ctrl.Result{}, fmt.Errorf("failed to set degraded condition: %v", setErr)
+	}
+	return ctrl.Result{}, err
+}
+
+// handleDegradeError sets CloudConfigControllerDegraded=True immediately and
+// returns nil so controller-runtime does NOT requeue. An existing watch on the
+// relevant resource will re-trigger reconciliation when the problem is fixed.
+func (r *CloudConfigReconciler) handleDegradeError(ctx context.Context, err error) (ctrl.Result, error) {
+	klog.Errorf("CloudConfigReconciler: permanent error, setting degraded: %v", err)
+	if setErr := r.setDegradedCondition(ctx); setErr != nil {
+		return ctrl.Result{}, fmt.Errorf("failed to set degraded condition: %v", setErr)
+	}
+	return ctrl.Result{}, nil
+}
+
 func (r *CloudConfigReconciler) isCloudConfigSyncNeeded(platformStatus *configv1.PlatformStatus, infraCloudConfigRef configv1.ConfigMapFileReference) (bool, error) {
 	if platformStatus == nil {
 		return false, fmt.Errorf("platformStatus is required")
diff --git a/pkg/controllers/cloud_config_sync_controller_test.go b/pkg/controllers/cloud_config_sync_controller_test.go
index 513e944e3..dcfcd02c7 100644
--- a/pkg/controllers/cloud_config_sync_controller_test.go
+++ b/pkg/controllers/cloud_config_sync_controller_test.go
@@ -348,8 +348,26 @@ var _ = Describe("Cloud config sync controller", func() {
 			}, timeout).Should(Succeed())
 			initialCMresourceVersion := syncedCloudConfigMap.ResourceVersion
 
+			// Introducing the consecutiveFailureWindow means that there's a field that could be racy
+			// between the manager calling Reconcile and the test calling Reconcile.
+			// In production, we only have 1 instance of the reconciler running.
+			// Create a fresh reconciler that is NOT registered with the manager.
+			// It shares the same API client (thread-safe) but has its own
+			// consecutiveFailureSince field, so no data race with the manager's copy.
+			freshReconciler := &CloudConfigReconciler{
+				ClusterOperatorStatusClient: ClusterOperatorStatusClient{
+					Client:           cl,
+					Clock:            clocktesting.NewFakePassiveClock(time.Now()),
+					ManagedNamespace: targetNamespaceName,
+				},
+				Scheme: scheme.Scheme,
+				FeatureGateAccess: featuregates.NewHardcodedFeatureGateAccessForTesting(
+					nil, []configv1.FeatureGateName{"AWSServiceLBNetworkSecurityGroup"}, nil, nil,
+				),
+			}
+
 			request := reconcile.Request{NamespacedName: client.ObjectKey{Name: "foo", Namespace: "bar"}}
-			_, err := reconciler.Reconcile(ctx, request)
+			_, err := freshReconciler.Reconcile(ctx, request)
 			Expect(err).Should(Succeed())
 
 			Expect(cl.Get(ctx, syncedConfigMapKey, syncedCloudConfigMap)).Should(Succeed())
@@ -509,7 +527,7 @@ var _ = Describe("Cloud config sync reconciler", func() {
 			Expect(len(allCMs.Items)).To(BeEquivalentTo(1))
 		})
 
-		It("should error if a user-specified configmap key isn't present", func() {
+		It("should degrade immediately if a user-specified configmap key isn't present", func() {
 			infraResource := makeInfrastructureResource(configv1.AWSPlatformType)
 			infraResource.Spec.CloudConfig.Key = "notfound"
 			Expect(cl.Create(ctx, infraResource)).To(Succeed())
@@ -518,8 +536,19 @@ var _ = Describe("Cloud config sync reconciler", func() {
 			Expect(cl.Status().Update(ctx, infraResource.DeepCopy())).To(Succeed())
 
 			_, err := reconciler.Reconcile(context.TODO(), ctrl.Request{})
-			Expect(err.Error()).To(ContainSubstring("specified in infra resource does not exist in source configmap"))
-
+			Expect(err).To(Succeed())
+
+			co := &configv1.ClusterOperator{}
+			Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+			var degradedCond *configv1.ClusterOperatorStatusCondition
+			for i := range co.Status.Conditions {
+				if co.Status.Conditions[i].Type == cloudConfigControllerDegradedCondition {
+					degradedCond = &co.Status.Conditions[i]
+					break
+				}
+			}
+			Expect(degradedCond).NotTo(BeNil())
+			Expect(degradedCond.Status).To(Equal(configv1.ConditionTrue))
 		})
 
 		It("should continue with reconcile when feature gates are available", func() {
@@ -584,15 +613,39 @@ var _ = Describe("Cloud config sync reconciler", func() {
 		})
 	})
 
-	It("reconcile should fail if no infra resource found", func() {
+	It("reconcile should succeed and be available if no infra resource found", func() {
 		_, err := reconciler.Reconcile(context.TODO(), ctrl.Request{})
-		Expect(err.Error()).Should(BeEquivalentTo("infrastructures.config.openshift.io \"cluster\" not found"))
+		Expect(err).To(Succeed())
+
+		co := &configv1.ClusterOperator{}
+		Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+		var availCond *configv1.ClusterOperatorStatusCondition
+		for i := range co.Status.Conditions {
+			if co.Status.Conditions[i].Type == cloudConfigControllerAvailableCondition {
+				availCond = &co.Status.Conditions[i]
+				break
+			}
+		}
+		Expect(availCond).NotTo(BeNil())
+		Expect(availCond.Status).To(Equal(configv1.ConditionTrue))
 	})
 
-	It("should fail if no PlatformStatus in infra resource presented ", func() {
+	It("should degrade immediately if no PlatformStatus in infra resource", func() {
 		infraResource := makeInfrastructureResource(configv1.AWSPlatformType)
 		Expect(cl.Create(ctx, infraResource)).To(Succeed())
 		_, err := reconciler.Reconcile(context.TODO(), ctrl.Request{})
-		Expect(err.Error()).Should(BeEquivalentTo("platformStatus is required"))
+		Expect(err).To(Succeed())
+
+		co := &configv1.ClusterOperator{}
+		Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+		var degradedCond *configv1.ClusterOperatorStatusCondition
+		for i := range co.Status.Conditions {
+			if co.Status.Conditions[i].Type == cloudConfigControllerDegradedCondition {
+				degradedCond = &co.Status.Conditions[i]
+				break
+			}
+		}
+		Expect(degradedCond).NotTo(BeNil())
+		Expect(degradedCond.Status).To(Equal(configv1.ConditionTrue))
 	})
 })
diff --git a/pkg/controllers/clusteroperator_controller.go b/pkg/controllers/clusteroperator_controller.go
index d94066e4c..7ed5f5d11 100644
--- a/pkg/controllers/clusteroperator_controller.go
+++ b/pkg/controllers/clusteroperator_controller.go
@@ -19,6 +19,7 @@ package controllers
 import (
 	"context"
 	"fmt"
+	"time"
 
 	configv1 "github.com/openshift/api/config/v1"
 	operatorv1 "github.com/openshift/api/operator/v1"
@@ -45,16 +46,24 @@ const (
 
 	// Condition type for Cloud Controller ownership
 	cloudControllerOwnershipCondition = "CloudControllerOwner"
+
+	// aggregatedTransientDegradedThreshold is how long transient errors must persist before
+	// the controller sets Degraded=True.
+	// This prevents brief API server blips during upgrades from immediately degrading the operator.
+	// Applies to top-level operator, and is longer in order
+	// to accomodate changes in the lower-level operators.
+	aggregatedTransientDegradedThreshold = 2*time.Minute + (30 * time.Second)
 )
 
 // CloudOperatorReconciler reconciles a ClusterOperator object
 type CloudOperatorReconciler struct {
 	ClusterOperatorStatusClient
-	Scheme            *runtime.Scheme
-	watcher           ObjectWatcher
-	ImagesFile        string
-	FeatureGateAccess featuregates.FeatureGateAccess
-	TLSProfileSpec    configv1.TLSProfileSpec
+	Scheme                  *runtime.Scheme
+	watcher                 ObjectWatcher
+	ImagesFile              string
+	FeatureGateAccess       featuregates.FeatureGateAccess
+	TLSProfileSpec          configv1.TLSProfileSpec
+	consecutiveFailureSince *time.Time // nil when the last reconcile succeeded
 }
 
 // +kubebuilder:rbac:groups=config.openshift.io,resources=clusteroperators,verbs=get;list;watch;create;update;patch;delete
@@ -69,59 +78,43 @@ func (r *CloudOperatorReconciler) Reconcile(ctx context.Context, _ ctrl.Request)
 	infra := &configv1.Infrastructure{}
 	if err := r.Get(ctx, client.ObjectKey{Name: infrastructureResourceName}, infra); errors.IsNotFound(err) {
 		klog.Infof("Infrastructure cluster does not exist. Skipping...")
-
 		if err := r.setStatusAvailable(ctx, conditionOverrides); err != nil {
 			klog.Errorf("Unable to sync cluster operator status: %s", err)
-			return ctrl.Result{}, err
+			return r.handleTransientError(ctx, conditionOverrides, err)
 		}
-
+		// It's ok for the infrastructure cluster to not exist
+		r.clearFailureWindow()
 		return ctrl.Result{}, nil
 	} else if err != nil {
 		klog.Errorf("Unable to retrive Infrastructure object: %v", err)
-
-		if err := r.setStatusDegraded(ctx, err, conditionOverrides); err != nil {
-			klog.Errorf("Error syncing ClusterOperatorStatus: %v", err)
-			return ctrl.Result{}, fmt.Errorf("error syncing ClusterOperatorStatus: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, conditionOverrides, err)
 	}
 
 	allowedToProvision, err := r.provisioningAllowed(ctx, infra, conditionOverrides)
 	if err != nil {
 		klog.Errorf("Unable to determine cluster state to check if provision is allowed: %v", err)
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, conditionOverrides, err)
 	} else if !allowedToProvision {
+		// We're not allowed to provision, but didn't have any failures.
+		r.clearFailureWindow()
 		return ctrl.Result{}, nil
 	}
 
 	clusterProxy := &configv1.Proxy{}
 	if err := r.Get(ctx, client.ObjectKey{Name: proxyResourceName}, clusterProxy); err != nil && !errors.IsNotFound(err) {
 		klog.Errorf("Unable to retrive Proxy object: %v", err)
-
-		if err := r.setStatusDegraded(ctx, err, conditionOverrides); err != nil {
-			klog.Errorf("Error syncing ClusterOperatorStatus: %v", err)
-			return ctrl.Result{}, fmt.Errorf("error syncing ClusterOperatorStatus: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, conditionOverrides, err)
 	}
 
 	operatorConfig, err := config.ComposeConfig(infra, clusterProxy, r.ImagesFile, r.ManagedNamespace, r.FeatureGateAccess, r.TLSProfileSpec)
 	if err != nil {
 		klog.Errorf("Unable to build operator config %s", err)
-		if err := r.setStatusDegraded(ctx, err, conditionOverrides); err != nil {
-			klog.Errorf("Error syncing ClusterOperatorStatus: %v", err)
-			return ctrl.Result{}, fmt.Errorf("error syncing ClusterOperatorStatus: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleDegradeError(ctx, conditionOverrides, err)
 	}
 
 	if err := r.sync(ctx, operatorConfig, conditionOverrides); err != nil {
 		klog.Errorf("Unable to sync operands: %s", err)
-		if err := r.setStatusDegraded(ctx, err, conditionOverrides); err != nil {
-			klog.Errorf("Error syncing ClusterOperatorStatus: %v", err)
-			return ctrl.Result{}, fmt.Errorf("error syncing ClusterOperatorStatus: %v", err)
-		}
-		return ctrl.Result{}, err
+		return r.handleTransientError(ctx, conditionOverrides, err)
 	}
 
 	if err := r.setStatusAvailable(ctx, conditionOverrides); err != nil {
@@ -134,9 +127,48 @@ func (r *CloudOperatorReconciler) Reconcile(ctx context.Context, _ ctrl.Request)
 		return ctrl.Result{}, err
 	}
 
+	// successful reconcile, make sure the failure window is cleared.
+	r.clearFailureWindow()
 	return ctrl.Result{}, nil
 }
 
+func (r *CloudOperatorReconciler) clearFailureWindow() {
+	r.consecutiveFailureSince = nil
+}
+
+// handleTransientError records the start of a failure window and degrades the
+// operator only after aggregatedTransientDegradedThreshold has elapsed. It always returns
+// a non-nil error so controller-runtime requeues with exponential backoff.
+func (r *CloudOperatorReconciler) handleTransientError(ctx context.Context, conditionOverrides []configv1.ClusterOperatorStatusCondition, err error) (ctrl.Result, error) {
+	now := r.Clock.Now()
+	if r.consecutiveFailureSince == nil {
+		r.consecutiveFailureSince = &now
+		klog.V(4).Infof("CloudOperatorReconciler: transient failure started (%v), will degrade after %s", err, aggregatedTransientDegradedThreshold)
+		return ctrl.Result{}, err
+	}
+	elapsed := r.Clock.Now().Sub(*r.consecutiveFailureSince)
+	if elapsed < aggregatedTransientDegradedThreshold {
+		klog.V(4).Infof("CloudOperatorReconciler: transient failure ongoing for %s (threshold %s): %v", elapsed, aggregatedTransientDegradedThreshold, err)
+		return ctrl.Result{}, err
+	}
+	klog.Warningf("CloudOperatorReconciler: transient failure exceeded threshold (%s), setting degraded: %v", elapsed, err)
+	if setErr := r.setStatusDegraded(ctx, err, conditionOverrides); setErr != nil {
+		return ctrl.Result{}, fmt.Errorf("error syncing ClusterOperatorStatus: %v", setErr)
+	}
+	return ctrl.Result{}, err
+}
+
+// handleDegradeError sets OperatorDegraded=True immediately and returns nil so
+// controller-runtime does NOT requeue. Existing watches on Infrastructure,
+// ConfigMaps, and Secrets will re-trigger reconciliation when the problem is fixed.
+func (r *CloudOperatorReconciler) handleDegradeError(ctx context.Context, conditionOverrides []configv1.ClusterOperatorStatusCondition, err error) (ctrl.Result, error) {
+	klog.Errorf("CloudOperatorReconciler: persistent error, setting degraded: %v", err)
+	if setErr := r.setStatusDegraded(ctx, err, conditionOverrides); setErr != nil {
+		return ctrl.Result{}, fmt.Errorf("error syncing ClusterOperatorStatus: %v", setErr)
+	}
+	return ctrl.Result{}, nil // do not requeue; a watch event will re-trigger
+}
+
 func (r *CloudOperatorReconciler) sync(ctx context.Context, config config.OperatorConfig, conditionOverrides []configv1.ClusterOperatorStatusCondition) error {
 	// Deploy resources for platform
 	resources, err := cloud.GetResources(config)
diff --git a/pkg/controllers/clusteroperator_controller_test.go b/pkg/controllers/clusteroperator_controller_test.go
index 041670762..987b5be2d 100644
--- a/pkg/controllers/clusteroperator_controller_test.go
+++ b/pkg/controllers/clusteroperator_controller_test.go
@@ -2,6 +2,7 @@ package controllers
 
 import (
 	"context"
+	"fmt"
 	"time"
 
 	. "github.com/onsi/ginkgo/v2"
@@ -618,3 +619,73 @@ var _ = Describe("Apply resources should", func() {
 	})
 
 })
+
+var _ = Describe("CloudOperatorReconciler error handling", func() {
+	ctx := context.Background()
+
+	AfterEach(func() {
+		co := &configv1.ClusterOperator{}
+		if err := cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co); err == nil {
+			Eventually(func() bool {
+				err := cl.Delete(ctx, co)
+				return err == nil || apierrors.IsNotFound(err)
+			}).Should(BeTrue())
+		}
+		Eventually(apierrors.IsNotFound(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co))).Should(BeTrue())
+	})
+
+	It("handleDegradeError should set OperatorDegraded=True immediately and return nil error", func() {
+		reconciler := &CloudOperatorReconciler{
+			ClusterOperatorStatusClient: ClusterOperatorStatusClient{
+				Client:           cl,
+				Clock:            clocktesting.NewFakePassiveClock(time.Now()),
+				ManagedNamespace: defaultManagementNamespace,
+				Recorder:         record.NewFakeRecorder(32),
+			},
+			Scheme: scheme.Scheme,
+		}
+
+		_, err := reconciler.handleDegradeError(ctx, []configv1.ClusterOperatorStatusCondition{}, fmt.Errorf("test persistent error"))
+		Expect(err).NotTo(HaveOccurred())
+
+		co := &configv1.ClusterOperator{}
+		Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+		Expect(v1helpers.IsStatusConditionTrue(co.Status.Conditions, configv1.OperatorDegraded)).To(BeTrue())
+	})
+
+	It("handleTransientError should not degrade before threshold, but degrade after threshold", func() {
+		fakeClock := clocktesting.NewFakeClock(time.Now())
+		reconciler := &CloudOperatorReconciler{
+			ClusterOperatorStatusClient: ClusterOperatorStatusClient{
+				Client:           cl,
+				Clock:            fakeClock,
+				ManagedNamespace: defaultManagementNamespace,
+				Recorder:         record.NewFakeRecorder(32),
+			},
+			Scheme: scheme.Scheme,
+		}
+
+		// Pre-create the ClusterOperator so that setStatusDegraded can update its status
+		// subresource when the threshold is exceeded (status subresource updates require the
+		// object to already exist in the cluster).
+		co := &configv1.ClusterOperator{}
+		co.SetName(clusterOperatorName)
+		Expect(cl.Create(ctx, co)).To(Succeed())
+
+		// First reconcile: transient failure starts; error returned but no degraded condition set.
+		_, err := reconciler.handleTransientError(ctx, []configv1.ClusterOperatorStatusCondition{}, fmt.Errorf("test transient error"))
+		Expect(err).To(HaveOccurred())
+		Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+		Expect(v1helpers.IsStatusConditionTrue(co.Status.Conditions, configv1.OperatorDegraded)).To(BeFalse(),
+			"should not be degraded before threshold")
+
+		// Advance clock past the degraded threshold.
+		fakeClock.Step(aggregatedTransientDegradedThreshold + time.Second)
+
+		// Second reconcile: threshold exceeded, controller sets degraded.
+		_, err = reconciler.handleTransientError(ctx, []configv1.ClusterOperatorStatusCondition{}, fmt.Errorf("test transient error"))
+		Expect(err).To(HaveOccurred())
+		Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+		Expect(v1helpers.IsStatusConditionTrue(co.Status.Conditions, configv1.OperatorDegraded)).To(BeTrue())
+	})
+})
diff --git a/pkg/controllers/trusted_ca_bundle_controller.go b/pkg/controllers/trusted_ca_bundle_controller.go
index ef33709e1..5921448d7 100644
--- a/pkg/controllers/trusted_ca_bundle_controller.go
+++ b/pkg/controllers/trusted_ca_bundle_controller.go
@@ -6,6 +6,7 @@ import (
 	"crypto/x509"
 	"fmt"
 	"os"
+	"time"
 
 	"github.com/openshift/api/annotations"
 	configv1 "github.com/openshift/api/config/v1"
@@ -41,8 +42,9 @@ const (
 
 type TrustedCABundleReconciler struct {
 	ClusterOperatorStatusClient
-	Scheme          *runtime.Scheme
-	trustBundlePath string
+	Scheme                  *runtime.Scheme
+	trustBundlePath         string
+	consecutiveFailureSince *time.Time // nil when the last reconcile succeeded
 }
 
 // isSpecTrustedCASet returns true if spec.trustedCA of proxyConfig is set.
@@ -62,13 +64,12 @@ func (r *TrustedCABundleReconciler) Reconcile(ctx context.Context, req ctrl.Requ
 			if err := r.setAvailableCondition(ctx); err != nil {
 				return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
 			}
+			// We tolerate the proxy config not being found.
+			r.clearFailureWindow()
 			return reconcile.Result{}, nil
 		}
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
-		}
-		// Error reading the object - requeue the request.
-		return reconcile.Result{}, fmt.Errorf("failed to get proxy '%s': %v", req.Name, err)
+		// Non-NotFound: transient API error.
+		return r.handleTransientError(ctx, fmt.Errorf("failed to get proxy '%s': %v", req.Name, err))
 	}
 
 	// Check if changed config map in 'openshift-config' namespace is proxy trusted ca.
@@ -77,43 +78,37 @@ func (r *TrustedCABundleReconciler) Reconcile(ctx context.Context, req ctrl.Requ
 		if err := r.setAvailableCondition(ctx); err != nil {
 			return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
 		}
-
+		// Note: clearFailureWindow is intentionally NOT called here. This path did not
+		// exercise the full reconcile logic, so an ongoing transient failure window
+		// (set by a previous reconcile pass) should not be reset.
 		klog.V(1).Infof("changed config map %s is not a proxy trusted ca, skipping", req)
 		return reconcile.Result{}, nil
 	}
 
 	systemTrustBundle, err := r.getSystemTrustBundle()
 	if err != nil {
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
-		}
-		return reconcile.Result{}, fmt.Errorf("failed to get system trust bundle: %v", err)
+		// Node cert store may be updating during upgrade: transient.
+		return r.handleTransientError(ctx, fmt.Errorf("failed to get system trust bundle: %v", err))
 	}
 
 	proxyCABundle, mergedTrustBundle, err := r.addProxyCABundle(ctx, proxyConfig, systemTrustBundle)
 	if err != nil {
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
-		}
-		return reconcile.Result{}, fmt.Errorf("can not check and add proxy CA to merged bundle: %v", err)
+		// Combined cert bundle is corrupt: persistent.
+		return r.handleDegradeError(ctx, fmt.Errorf("can not check and add proxy CA to merged bundle: %v", err))
 	}
 
 	_, mergedTrustBundle, err = r.addCloudConfigCABundle(ctx, proxyCABundle, mergedTrustBundle)
 	if err != nil {
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
-		}
-		return reconcile.Result{}, fmt.Errorf("can not check and add cloud-config CA to merged bundle: %v", err)
+		// Combined cert bundle is corrupt: persistent.
+		return r.handleDegradeError(ctx, fmt.Errorf("can not check and add cloud-config CA to merged bundle: %v", err))
 	}
 
 	ccmTrustedConfigMap := r.makeCABundleConfigMap(mergedTrustBundle)
 	if err := r.createOrUpdateConfigMap(ctx, ccmTrustedConfigMap); err != nil {
-		if err := r.setDegradedCondition(ctx); err != nil {
-			return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
-		}
-		return reconcile.Result{}, fmt.Errorf("can not update target trust bundle configmap: %v", err)
+		return r.handleTransientError(ctx, fmt.Errorf("can not update target trust bundle configmap: %v", err))
 	}
 
+	r.clearFailureWindow()
 	if err := r.setAvailableCondition(ctx); err != nil {
 		return ctrl.Result{}, fmt.Errorf("failed to set conditions for trusted CA bundle controller: %v", err)
 	}
@@ -121,6 +116,43 @@ func (r *TrustedCABundleReconciler) Reconcile(ctx context.Context, req ctrl.Requ
 	return ctrl.Result{}, nil
 }
 
+func (r *TrustedCABundleReconciler) clearFailureWindow() {
+	r.consecutiveFailureSince = nil
+}
+
+// handleTransientError records the start of a failure window and degrades the
+// controller only after transientDegradedThreshold has elapsed. It always
+// returns a non-nil error so controller-runtime requeues with exponential backoff.
+func (r *TrustedCABundleReconciler) handleTransientError(ctx context.Context, err error) (ctrl.Result, error) {
+	now := r.Clock.Now()
+	if r.consecutiveFailureSince == nil {
+		r.consecutiveFailureSince = &now
+		klog.V(4).Infof("TrustedCABundleReconciler: transient failure started (%v), will degrade after %s", err, transientDegradedThreshold)
+		return ctrl.Result{}, err
+	}
+	elapsed := r.Clock.Now().Sub(*r.consecutiveFailureSince)
+	if elapsed < transientDegradedThreshold {
+		klog.V(4).Infof("TrustedCABundleReconciler: transient failure ongoing for %s (threshold %s): %v", elapsed, transientDegradedThreshold, err)
+		return ctrl.Result{}, err
+	}
+	klog.Warningf("TrustedCABundleReconciler: transient failure exceeded threshold (%s), setting degraded: %v", elapsed, err)
+	if setErr := r.setDegradedCondition(ctx); setErr != nil {
+		return ctrl.Result{}, fmt.Errorf("failed to set degraded condition: %v", setErr)
+	}
+	return ctrl.Result{}, err
+}
+
+// handleDegradeError sets TrustedCABundleControllerControllerDegraded=True immediately and
+// returns nil so controller-runtime does NOT requeue. An existing watch on the
+// relevant resource will re-trigger reconciliation when the problem is fixed.
+func (r *TrustedCABundleReconciler) handleDegradeError(ctx context.Context, err error) (ctrl.Result, error) {
+	klog.Errorf("TrustedCABundleReconciler: persistent error, setting degraded: %v", err)
+	if setErr := r.setDegradedCondition(ctx); setErr != nil {
+		return ctrl.Result{}, fmt.Errorf("failed to set degraded condition: %v", setErr)
+	}
+	return ctrl.Result{}, nil
+}
+
 // addProxyCABundle checks ca bundle referred by Proxy resource and adds it to passed bundle
 // in case if proxy one is valid.
 // This function returns added bundle as first value, result as second and an error if it was occurred.
diff --git a/pkg/controllers/trusted_ca_bundle_controller_test.go b/pkg/controllers/trusted_ca_bundle_controller_test.go
index 2c112413f..db1be8c07 100644
--- a/pkg/controllers/trusted_ca_bundle_controller_test.go
+++ b/pkg/controllers/trusted_ca_bundle_controller_test.go
@@ -16,6 +16,7 @@ import (
 	"k8s.io/client-go/tools/record"
 	clocktesting "k8s.io/utils/clock/testing"
 	"k8s.io/utils/ptr"
+	ctrl "sigs.k8s.io/controller-runtime"
 	"sigs.k8s.io/controller-runtime/pkg/client"
 	"sigs.k8s.io/controller-runtime/pkg/config"
 	"sigs.k8s.io/controller-runtime/pkg/manager"
@@ -309,6 +310,92 @@ var _ = Describe("Trusted CA bundle sync controller", func() {
 	})
 })
 
+var _ = Describe("Trusted CA bundle reconciler unit tests", func() {
+	ctx := context.Background()
+
+	AfterEach(func() {
+		co := &v1.ClusterOperator{}
+		if err := cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co); err == nil {
+			Expect(cl.Delete(ctx, co)).To(Succeed())
+			Eventually(func() bool {
+				return apierrors.IsNotFound(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co))
+			}).Should(BeTrue())
+		}
+	})
+
+	It("reconcile should succeed and be available if no proxy resource found", func() {
+		reconciler := &TrustedCABundleReconciler{
+			ClusterOperatorStatusClient: ClusterOperatorStatusClient{
+				Client:           cl,
+				Clock:            clocktesting.NewFakePassiveClock(time.Now()),
+				ManagedNamespace: testManagedNamespace,
+			},
+			trustBundlePath: systemCAValid,
+		}
+
+		_, err := reconciler.Reconcile(ctx, ctrl.Request{})
+		Expect(err).To(Succeed())
+
+		co := &v1.ClusterOperator{}
+		Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+		var availCond *v1.ClusterOperatorStatusCondition
+		for i := range co.Status.Conditions {
+			if co.Status.Conditions[i].Type == trustedCABundleControllerAvailableCondition {
+				availCond = &co.Status.Conditions[i]
+				break
+			}
+		}
+		Expect(availCond).NotTo(BeNil())
+		Expect(availCond.Status).To(Equal(v1.ConditionTrue))
+	})
+
+	It("should not degrade on transient error before threshold, but degrade after threshold", func() {
+		fakeClock := clocktesting.NewFakeClock(time.Now())
+		reconciler := &TrustedCABundleReconciler{
+			ClusterOperatorStatusClient: ClusterOperatorStatusClient{
+				Client:           cl,
+				Clock:            fakeClock,
+				ManagedNamespace: testManagedNamespace,
+			},
+			trustBundlePath: "/broken/ca/path.pem", // unreadable → transient error
+		}
+
+		// Create a Proxy so the Proxy get succeeds and we reach the system trust bundle read.
+		proxy := &v1.Proxy{ObjectMeta: metav1.ObjectMeta{Name: proxyResourceName}}
+		Expect(cl.Create(ctx, proxy)).To(Succeed())
+		DeferCleanup(func() { _ = cl.Delete(ctx, proxy) })
+
+		// First reconcile: transient failure starts; error is returned but no degraded condition set.
+		_, err := reconciler.Reconcile(ctx, ctrl.Request{})
+		Expect(err).To(HaveOccurred())
+		co := &v1.ClusterOperator{}
+		if getErr := cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co); getErr == nil {
+			for _, cond := range co.Status.Conditions {
+				if cond.Type == trustedCABundleControllerDegradedCondition {
+					Expect(cond.Status).NotTo(Equal(v1.ConditionTrue), "should not be degraded before threshold")
+				}
+			}
+		}
+
+		// Advance clock past the degraded threshold.
+		fakeClock.Step(transientDegradedThreshold + time.Second)
+
+		// Second reconcile: threshold exceeded, controller sets degraded.
+		_, err = reconciler.Reconcile(ctx, ctrl.Request{})
+		Expect(err).To(HaveOccurred())
+		Expect(cl.Get(ctx, client.ObjectKey{Name: clusterOperatorName}, co)).To(Succeed())
+		var degradedCond *v1.ClusterOperatorStatusCondition
+		for i := range co.Status.Conditions {
+			if co.Status.Conditions[i].Type == trustedCABundleControllerDegradedCondition {
+				degradedCond = &co.Status.Conditions[i]
+				break
+			}
+		}
+		Expect(degradedCond).NotTo(BeNil())
+		Expect(degradedCond.Status).To(Equal(v1.ConditionTrue))
+	})
+})
+
 var _ = Describe("Trusted CA reconciler methods", func() {
 	It("Get system CA should be fine if bundle is valid", func() {
 		reconciler := &TrustedCABundleReconciler{