diff --git a/src/dstack/_internal/server/background/tasks/process_instances.py b/src/dstack/_internal/server/background/tasks/process_instances.py
index 51e9310d7..f4b57a855 100644
--- a/src/dstack/_internal/server/background/tasks/process_instances.py
+++ b/src/dstack/_internal/server/background/tasks/process_instances.py
@@ -64,6 +64,7 @@
     Retry,
 )
 from dstack._internal.core.services.profiles import get_retry
+from dstack._internal.server import settings as server_settings
 from dstack._internal.server.background.tasks.common import get_provisioning_timeout
 from dstack._internal.server.db import get_session_ctx
 from dstack._internal.server.models import (
@@ -529,7 +530,9 @@ async def _create_instance(session: AsyncSession, instance: InstanceModel) -> No
             session=session, fleet_id=instance.fleet_id
         )
 
-    for backend, instance_offer in offers:
+    # Limit number of offers tried to prevent long-running processing
+    # in case all offers fail.
+    for backend, instance_offer in offers[: server_settings.MAX_OFFERS_TRIED]:
         if instance_offer.backend not in BACKENDS_WITH_CREATE_INSTANCE_SUPPORT:
             continue
         compute = backend.compute()
@@ -578,8 +581,13 @@ async def _create_instance(session: AsyncSession, instance: InstanceModel) -> No
                 extra={"instance_name": instance.name},
             )
             continue
-        except NotImplementedError:
-            # skip a backend without create_instance support, continue with next backend and offer
+        except Exception:
+            logger.exception(
+                "Got exception when launching %s in %s/%s",
+                instance_offer.instance.name,
+                instance_offer.backend.value,
+                instance_offer.region,
+            )
             continue
 
         instance.status = InstanceStatus.PROVISIONING
@@ -607,10 +615,11 @@ async def _create_instance(session: AsyncSession, instance: InstanceModel) -> No
 
     if not should_retry:
         instance.status = InstanceStatus.TERMINATED
-        instance.termination_reason = "No offers found"
+        instance.termination_reason = "All offers failed" if offers else "No offers found"
         logger.info(
-            "No offers found. Terminated instance %s",
+            "Terminated instance %s: %s",
             instance.name,
+            instance.termination_reason,
             extra={
                 "instance_name": instance.name,
                 "instance_status": InstanceStatus.TERMINATED.value,
diff --git a/src/tests/_internal/server/background/tasks/test_process_instances.py b/src/tests/_internal/server/background/tasks/test_process_instances.py
index 91f878901..d71f8e9c1 100644
--- a/src/tests/_internal/server/background/tasks/test_process_instances.py
+++ b/src/tests/_internal/server/background/tasks/test_process_instances.py
@@ -8,7 +8,7 @@
 from freezegun import freeze_time
 from sqlalchemy.ext.asyncio import AsyncSession
 
-from dstack._internal.core.errors import BackendError
+from dstack._internal.core.errors import BackendError, ProvisioningError
 from dstack._internal.core.models.backends.base import BackendType
 from dstack._internal.core.models.instances import (
     Gpu,
@@ -35,6 +35,8 @@
     create_repo,
     create_run,
     create_user,
+    get_instance_offer_with_availability,
+    get_job_provisioning_data,
     get_remote_connection_info,
 )
 from dstack._internal.utils.common import get_current_datetime
@@ -557,6 +559,68 @@ async def test_creates_instance(
         assert instance.total_blocks == expected_blocks
         assert instance.busy_blocks == 0
 
+    @pytest.mark.parametrize("err", [RuntimeError("Unexpected"), ProvisioningError("Expected")])
+    async def test_tries_second_offer_if_first_fails(self, session: AsyncSession, err: Exception):
+        project = await create_project(session=session)
+        instance = await create_instance(
+            session=session, project=project, status=InstanceStatus.PENDING
+        )
+        aws_mock = Mock()
+        aws_mock.TYPE = BackendType.AWS
+        offer = get_instance_offer_with_availability(backend=BackendType.AWS, price=1.0)
+        aws_mock.compute.return_value = Mock(spec=ComputeMockSpec)
+        aws_mock.compute.return_value.get_offers_cached.return_value = [offer]
+        aws_mock.compute.return_value.create_instance.side_effect = err
+        gcp_mock = Mock()
+        gcp_mock.TYPE = BackendType.GCP
+        offer = get_instance_offer_with_availability(backend=BackendType.GCP, price=2.0)
+        gcp_mock.compute.return_value = Mock(spec=ComputeMockSpec)
+        gcp_mock.compute.return_value.get_offers_cached.return_value = [offer]
+        gcp_mock.compute.return_value.create_instance.return_value = get_job_provisioning_data(
+            backend=offer.backend, region=offer.region, price=offer.price
+        )
+        with patch("dstack._internal.server.services.backends.get_project_backends") as m:
+            m.return_value = [aws_mock, gcp_mock]
+            await process_instances()
+
+        await session.refresh(instance)
+        assert instance.status == InstanceStatus.PROVISIONING
+        aws_mock.compute.return_value.create_instance.assert_called_once()
+        assert instance.backend == BackendType.GCP
+
+    @pytest.mark.parametrize("err", [RuntimeError("Unexpected"), ProvisioningError("Expected")])
+    async def test_fails_if_all_offers_fail(self, session: AsyncSession, err: Exception):
+        project = await create_project(session=session)
+        instance = await create_instance(
+            session=session, project=project, status=InstanceStatus.PENDING
+        )
+        aws_mock = Mock()
+        aws_mock.TYPE = BackendType.AWS
+        offer = get_instance_offer_with_availability(backend=BackendType.AWS, price=1.0)
+        aws_mock.compute.return_value = Mock(spec=ComputeMockSpec)
+        aws_mock.compute.return_value.get_offers_cached.return_value = [offer]
+        aws_mock.compute.return_value.create_instance.side_effect = err
+        with patch("dstack._internal.server.services.backends.get_project_backends") as m:
+            m.return_value = [aws_mock]
+            await process_instances()
+
+        await session.refresh(instance)
+        assert instance.status == InstanceStatus.TERMINATED
+        assert instance.termination_reason == "All offers failed"
+
+    async def test_fails_if_no_offers(self, session: AsyncSession):
+        project = await create_project(session=session)
+        instance = await create_instance(
+            session=session, project=project, status=InstanceStatus.PENDING
+        )
+        with patch("dstack._internal.server.services.backends.get_project_backends") as m:
+            m.return_value = []
+            await process_instances()
+
+        await session.refresh(instance)
+        assert instance.status == InstanceStatus.TERMINATED
+        assert instance.termination_reason == "No offers found"
+
 
 @pytest.mark.asyncio
 @pytest.mark.parametrize("test_db", ["sqlite", "postgres"], indirect=True)