diff --git a/salt/_runners/setup_hypervisor.py b/salt/_runners/setup_hypervisor.py
index 7d521bd62..182a9b2c8 100644
--- a/salt/_runners/setup_hypervisor.py
+++ b/salt/_runners/setup_hypervisor.py
@@ -489,7 +489,7 @@ def _ensure_hypervisor_host_dir(minion_id: str = None):
         log.error(f"Error creating hypervisor host directory: {str(e)}")
         return False
 
-def _apply_dyanno_hypervisor_state(status='Initialized'):
+def _apply_dyanno_hypervisor_state(status):
     """
     Apply the soc.dyanno.hypervisor state on the salt master.
     
@@ -671,11 +671,6 @@ def setup_environment(vm_name: str = 'sool9', disk_size: str = '220G', minion_id
         log.warning("Failed to apply salt.cloud.config state, continuing with setup")
         # We don't return an error here as we want to continue with the setup process
 
-    # Apply the soc.dyanno.hypervisor state on the salt master with PreInit status
-    if not _apply_dyanno_hypervisor_state('PreInit'):
-        log.warning("Failed to apply soc.dyanno.hypervisor state, continuing with setup")
-        # We don't return an error here as we want to continue with the setup process
-
     log.info("Starting setup_environment in setup_hypervisor runner")
     
     # Check if environment is already set up
@@ -689,6 +684,7 @@ def setup_environment(vm_name: str = 'sool9', disk_size: str = '220G', minion_id
     
     # Handle image setup if needed
     if not image_valid:
+        _apply_dyanno_hypervisor_state('ImageDownloadStart')
         log.info("Starting image download/validation process")
         if not _download_image():
             log.error("Image download failed")
@@ -734,7 +730,7 @@ def setup_environment(vm_name: str = 'sool9', disk_size: str = '220G', minion_id
     
     # Update hypervisor annotation with success status
     if success:
-        _apply_dyanno_hypervisor_state('Initialized')
+        _apply_dyanno_hypervisor_state('PreInit')
     else:
         _apply_dyanno_hypervisor_state('SetupFailed')
     
diff --git a/salt/soc/dyanno/hypervisor/soc_hypervisor.yaml.jinja b/salt/soc/dyanno/hypervisor/soc_hypervisor.yaml.jinja
index 97170a55f..f23fdb5d9 100644
--- a/salt/soc/dyanno/hypervisor/soc_hypervisor.yaml.jinja
+++ b/salt/soc/dyanno/hypervisor/soc_hypervisor.yaml.jinja
@@ -43,6 +43,10 @@
 
 No Virtual Machines Found
 {%-   endif %}
+{%- elif baseDomainStatus == 'ImageDownloadStart' %}
+#### INFO
+
+Base domain image download started.
 {%- elif baseDomainStatus == 'ImageDownloadFailed' %}
 #### ERROR
 
@@ -55,10 +59,10 @@ SSH key setup failed. Please check the salt-master log for details.
 #### WARNING
 
 Setup failed. Please check the salt-master log for details.
-{%- else %}
+{%- elif baseDomainStatus == 'PreInit' %}
 #### WARNING
 
-Base domain has not been initialized.
+Base domain has not been initialized. Waiting for hypervisor to highstate.
 {%- endif %}
 {%- endmacro -%}