diff --git a/lib/init-action.js b/lib/init-action.js
index f34a1bc2f..3ea0dfbf6 100644
--- a/lib/init-action.js
+++ b/lib/init-action.js
@@ -106378,25 +106378,21 @@ async function prepareDiffInformedAnalysis(codeql, features, logger) {
     logger.warning(
       `Failed to determine branch information for diff-informed analysis: ${getErrorMessage(e)}`
     );
-    return { shouldRun: false, hasDiffRanges: false };
+    return false;
   }
   if (!branches) {
-    return { shouldRun: false, hasDiffRanges: false };
+    return false;
   }
-  const hasDiffRanges = await withGroupAsync(
-    "Computing PR diff ranges",
-    async () => {
-      try {
-        return await computeAndPersistDiffRanges(branches, logger);
-      } catch (e) {
-        logger.warning(
-          `Failed to compute diff-informed analysis ranges: ${getErrorMessage(e)}`
-        );
-        return false;
-      }
+  return await withGroupAsync("Computing PR diff ranges", async () => {
+    try {
+      return await computeAndPersistDiffRanges(branches, logger);
+    } catch (e) {
+      logger.warning(
+        `Failed to compute diff-informed analysis ranges: ${getErrorMessage(e)}`
+      );
+      return false;
     }
-  );
-  return { shouldRun: true, hasDiffRanges };
+  });
 }
 function writeDiffRangesJsonFile(logger, ranges) {
   const jsonContents = JSON.stringify(ranges, null, 2);
@@ -107283,14 +107279,20 @@ function userConfigFromActionPath(tempDir) {
 function hasQueryCustomisation(userConfig) {
   return isDefined2(userConfig["disable-default-queries"]) || isDefined2(userConfig.queries) || isDefined2(userConfig["query-filters"]);
 }
-function applyIncrementalAnalysisSettings(config, diffInformedAnalysis, logger) {
-  if (config.overlayDatabaseMode === "overlay" /* Overlay */ && diffInformedAnalysis.shouldRun && !diffInformedAnalysis.hasDiffRanges) {
+async function applyIncrementalAnalysisSettings(config, hasDiffRanges, codeql, logger) {
+  if (config.overlayDatabaseMode === "overlay" /* Overlay */ && !hasDiffRanges) {
     logger.info(
-      `Diff-informed analysis is not available for this pull request. Reverting overlay database mode to ${"none" /* None */}.`
+      `Reverting overlay database mode to ${"none" /* None */} because the PR diff ranges could not be computed.`
     );
     config.overlayDatabaseMode = "none" /* None */;
+    config.useOverlayDatabaseCaching = false;
+    await addOverlayDisablementDiagnostics(
+      config,
+      codeql,
+      "pr-diff-ranges-not-computed" /* PrDiffRangesNotComputed */
+    );
   }
-  if (config.overlayDatabaseMode === "overlay" /* Overlay */ || diffInformedAnalysis.hasDiffRanges) {
+  if (hasDiffRanges) {
     config.extraQueryExclusions.push({
       exclude: { tags: "exclude-from-incremental" }
     });
@@ -107405,12 +107407,17 @@ async function initConfig(features, inputs) {
       overlayDisabledReason
     );
   }
-  const diffInformedAnalysis = await prepareDiffInformedAnalysis(
+  const hasDiffRanges = await prepareDiffInformedAnalysis(
     inputs.codeql,
     inputs.features,
     logger
   );
-  applyIncrementalAnalysisSettings(config, diffInformedAnalysis, logger);
+  await applyIncrementalAnalysisSettings(
+    config,
+    hasDiffRanges,
+    inputs.codeql,
+    logger
+  );
   if (await isTrapCachingEnabled(features, config.overlayDatabaseMode)) {
     const { trapCaches, trapCacheDownloadTime } = await downloadCacheWithTime(
       inputs.codeql,
diff --git a/src/config-utils.test.ts b/src/config-utils.test.ts
index c75f4e225..417b61c75 100644
--- a/src/config-utils.test.ts
+++ b/src/config-utils.test.ts
@@ -2201,14 +2201,16 @@ test.serial(
   },
 );
 
-test("applyIncrementalAnalysisSettings: no-op when mode is not Overlay and diff-informed is unavailable", (t) => {
+test("applyIncrementalAnalysisSettings: no-op when mode is not Overlay and diff ranges are unavailable", async (t) => {
   const config = createTestConfig({});
   config.overlayDatabaseMode = OverlayDatabaseMode.None;
+  const codeql = createStubCodeQL({});
   const logger = getRunnerLogger(true);
 
-  configUtils.applyIncrementalAnalysisSettings(
+  await configUtils.applyIncrementalAnalysisSettings(
     config,
-    { shouldRun: false, hasDiffRanges: false },
+    false,
+    codeql,
     logger,
   );
 
@@ -2216,14 +2218,17 @@ test("applyIncrementalAnalysisSettings: no-op when mode is not Overlay and diff-
   t.deepEqual(config.extraQueryExclusions, []);
 });
 
-test("applyIncrementalAnalysisSettings: keeps overlay mode and adds exclusions when diff-informed analysis shouldn't run", (t) => {
-  const config = createTestConfig({});
-  config.overlayDatabaseMode = OverlayDatabaseMode.Overlay;
+test("applyIncrementalAnalysisSettings: keeps overlay mode and adds exclusions when diff ranges are available", async (t) => {
+  const config = createTestConfig({
+    overlayDatabaseMode: OverlayDatabaseMode.Overlay,
+  });
+  const codeql = createStubCodeQL({});
   const logger = getRunnerLogger(true);
 
-  configUtils.applyIncrementalAnalysisSettings(
+  await configUtils.applyIncrementalAnalysisSettings(
     config,
-    { shouldRun: false, hasDiffRanges: false },
+    true,
+    codeql,
     logger,
   );
 
@@ -2233,30 +2238,36 @@ test("applyIncrementalAnalysisSettings: keeps overlay mode and adds exclusions w
   ]);
 });
 
-test("applyIncrementalAnalysisSettings: disables overlay analysis when diff-informed analysis is unavailable", (t) => {
+test("applyIncrementalAnalysisSettings: disables overlay analysis when diff ranges are unavailable", async (t) => {
   const config = createTestConfig({
     overlayDatabaseMode: OverlayDatabaseMode.Overlay,
   });
+  config.useOverlayDatabaseCaching = true;
+  const codeql = createStubCodeQL({});
   const logger = getRunnerLogger(true);
 
-  configUtils.applyIncrementalAnalysisSettings(
+  await configUtils.applyIncrementalAnalysisSettings(
     config,
-    { shouldRun: true, hasDiffRanges: false },
+    false,
+    codeql,
     logger,
   );
 
   t.is(config.overlayDatabaseMode, OverlayDatabaseMode.None);
+  t.is(config.useOverlayDatabaseCaching, false);
   t.deepEqual(config.extraQueryExclusions, []);
 });
 
-test("applyIncrementalAnalysisSettings: adds exclusions for diff-informed-only runs", (t) => {
+test("applyIncrementalAnalysisSettings: adds exclusions for diff-informed-only runs", async (t) => {
   const config = createTestConfig({});
   config.overlayDatabaseMode = OverlayDatabaseMode.None;
+  const codeql = createStubCodeQL({});
   const logger = getRunnerLogger(true);
 
-  configUtils.applyIncrementalAnalysisSettings(
+  await configUtils.applyIncrementalAnalysisSettings(
     config,
-    { shouldRun: true, hasDiffRanges: true },
+    true,
+    codeql,
     logger,
   );
 
diff --git a/src/config-utils.ts b/src/config-utils.ts
index 0fd2d33b4..563cd31c4 100644
--- a/src/config-utils.ts
+++ b/src/config-utils.ts
@@ -31,10 +31,7 @@ import {
   addNoLanguageDiagnostic,
   makeTelemetryDiagnostic,
 } from "./diagnostics";
-import {
-  type DiffInformedAnalysisPreparation,
-  prepareDiffInformedAnalysis,
-} from "./diff-informed-analysis-utils";
+import { prepareDiffInformedAnalysis } from "./diff-informed-analysis-utils";
 import { EnvVar } from "./environment";
 import * as errorMessages from "./error-messages";
 import { Feature, FeatureEnablement } from "./feature-flags";
@@ -1082,39 +1079,39 @@ function hasQueryCustomisation(userConfig: UserConfig): boolean {
 /**
  * Finalize the incremental-analysis configuration for this run.
  *
- * If overlay mode was selected for a PR but diff-informed analysis should have
- * run and could not be prepared, fall back to a full non-overlay analysis.
- * Query exclusions for incremental-only queries are applied only when the final
- * configuration still uses overlay analysis or the diff ranges are available.
+ * Overlay analysis has only been validated in combination with diff-informed
+ * analysis, so if `Overlay` mode was selected for a pull request but the diff
+ * ranges could not be computed, fall back to a full non-overlay analysis.
  *
- * Note that `overlayDatabaseMode === Overlay` does not imply
- * `diffInformedAnalysis.shouldRun`. Overlay mode is selected based on language
- * and feature-flag state and can apply outside of pull-request contexts (e.g.
- * on branch pushes that build up the overlay cache), whereas diff-informed
- * analysis only runs for pull requests where we can compute a diff. Each
- * combination is therefore handled explicitly.
+ * Query exclusions for incremental-only queries are then applied whenever the
+ * diff ranges are available — which, after the fallback above, is exactly the
+ * set of runs where any kind of incremental analysis (overlay or
+ * diff-informed) is in effect.
  */
-export function applyIncrementalAnalysisSettings(
+export async function applyIncrementalAnalysisSettings(
   config: Config,
-  diffInformedAnalysis: DiffInformedAnalysisPreparation,
+  hasDiffRanges: boolean,
+  codeql: CodeQL,
   logger: Logger,
-): void {
+): Promise<void> {
   if (
     config.overlayDatabaseMode === OverlayDatabaseMode.Overlay &&
-    diffInformedAnalysis.shouldRun &&
-    !diffInformedAnalysis.hasDiffRanges
+    !hasDiffRanges
   ) {
     logger.info(
-      "Diff-informed analysis is not available for this pull request. " +
-        `Reverting overlay database mode to ${OverlayDatabaseMode.None}.`,
+      `Reverting overlay database mode to ${OverlayDatabaseMode.None} ` +
+        "because the PR diff ranges could not be computed.",
     );
     config.overlayDatabaseMode = OverlayDatabaseMode.None;
+    config.useOverlayDatabaseCaching = false;
+    await addOverlayDisablementDiagnostics(
+      config,
+      codeql,
+      OverlayDisabledReason.PrDiffRangesNotComputed,
+    );
   }
 
-  if (
-    config.overlayDatabaseMode === OverlayDatabaseMode.Overlay ||
-    diffInformedAnalysis.hasDiffRanges
-  ) {
+  if (hasDiffRanges) {
     config.extraQueryExclusions.push({
       exclude: { tags: "exclude-from-incremental" },
     });
@@ -1275,13 +1272,18 @@ export async function initConfig(
     );
   }
 
-  const diffInformedAnalysis = await prepareDiffInformedAnalysis(
+  const hasDiffRanges = await prepareDiffInformedAnalysis(
     inputs.codeql,
     inputs.features,
     logger,
   );
 
-  applyIncrementalAnalysisSettings(config, diffInformedAnalysis, logger);
+  await applyIncrementalAnalysisSettings(
+    config,
+    hasDiffRanges,
+    inputs.codeql,
+    logger,
+  );
 
   if (await isTrapCachingEnabled(features, config.overlayDatabaseMode)) {
     const { trapCaches, trapCacheDownloadTime } = await downloadCacheWithTime(
diff --git a/src/diff-informed-analysis-utils.test.ts b/src/diff-informed-analysis-utils.test.ts
index b1c0b14b7..96fce23eb 100644
--- a/src/diff-informed-analysis-utils.test.ts
+++ b/src/diff-informed-analysis-utils.test.ts
@@ -190,7 +190,7 @@ test.serial(
 );
 
 test.serial(
-  "prepareDiffInformedAnalysis: returns shouldRun=false when not a pull request",
+  "prepareDiffInformedAnalysis: returns false when not a pull request",
   async (t) => {
     await withTmpDir(async (tmpDir) => {
       setupActionsVars(tmpDir, tmpDir);
@@ -209,13 +209,13 @@ test.serial(
         logger,
       );
 
-      t.deepEqual(result, { shouldRun: false, hasDiffRanges: false });
+      t.false(result);
     });
   },
 );
 
 test.serial(
-  "prepareDiffInformedAnalysis: returns shouldRun=false when applicability check throws",
+  "prepareDiffInformedAnalysis: returns false when applicability check throws",
   async (t) => {
     await withTmpDir(async (tmpDir) => {
       setupActionsVars(tmpDir, tmpDir);
@@ -239,13 +239,13 @@ test.serial(
         logger,
       );
 
-      t.deepEqual(result, { shouldRun: false, hasDiffRanges: false });
+      t.false(result);
     });
   },
 );
 
 test.serial(
-  "prepareDiffInformedAnalysis: returns hasDiffRanges=true when the diff is fetched successfully",
+  "prepareDiffInformedAnalysis: returns true when the diff is fetched successfully",
   async (t) => {
     await withTmpDir(async (tmpDir) => {
       setupActionsVars(tmpDir, tmpDir);
@@ -276,13 +276,13 @@ test.serial(
         logger,
       );
 
-      t.deepEqual(result, { shouldRun: true, hasDiffRanges: true });
+      t.true(result);
     });
   },
 );
 
 test.serial(
-  "prepareDiffInformedAnalysis: returns hasDiffRanges=false when the diff API call fails",
+  "prepareDiffInformedAnalysis: returns false when the diff API call fails",
   async (t) => {
     await withTmpDir(async (tmpDir) => {
       setupActionsVars(tmpDir, tmpDir);
@@ -313,7 +313,7 @@ test.serial(
         logger,
       );
 
-      t.deepEqual(result, { shouldRun: true, hasDiffRanges: false });
+      t.false(result);
     });
   },
 );
diff --git a/src/diff-informed-analysis-utils.ts b/src/diff-informed-analysis-utils.ts
index 9760d873d..a48c6dcfd 100644
--- a/src/diff-informed-analysis-utils.ts
+++ b/src/diff-informed-analysis-utils.ts
@@ -55,30 +55,18 @@ export async function getDiffInformedAnalysisBranches(
   return branches;
 }
 
-export interface DiffInformedAnalysisPreparation {
-  /**
-   * Whether diff-informed analysis applies to this workflow run.
-   */
-  shouldRun: boolean;
-  /**
-   * Whether the diff ranges were successfully computed and persisted, and are
-   * therefore available for use.
-   */
-  hasDiffRanges: boolean;
-}
-
 /**
  * Prepares the diff ranges needed for diff-informed analysis for the current
  * run.
  *
- * @returns Whether diff-informed analysis applies to this run, and whether the
- *   diff ranges were successfully computed and persisted.
+ * @returns `true` if the diff ranges were successfully computed and persisted
+ *   and are therefore available for use, `false` otherwise.
  */
 export async function prepareDiffInformedAnalysis(
   codeql: CodeQL,
   features: FeatureEnablement,
   logger: Logger,
-): Promise<DiffInformedAnalysisPreparation> {
+): Promise<boolean> {
   let branches: PullRequestBranches | undefined;
   try {
     branches = await getDiffInformedAnalysisBranches(codeql, features, logger);
@@ -89,26 +77,22 @@ export async function prepareDiffInformedAnalysis(
     logger.warning(
       `Failed to determine branch information for diff-informed analysis: ${getErrorMessage(e)}`,
     );
-    return { shouldRun: false, hasDiffRanges: false };
+    return false;
   }
   if (!branches) {
-    return { shouldRun: false, hasDiffRanges: false };
+    return false;
   }
 
-  const hasDiffRanges = await withGroupAsync(
-    "Computing PR diff ranges",
-    async () => {
-      try {
-        return await computeAndPersistDiffRanges(branches, logger);
-      } catch (e) {
-        logger.warning(
-          `Failed to compute diff-informed analysis ranges: ${getErrorMessage(e)}`,
-        );
-        return false;
-      }
-    },
-  );
-  return { shouldRun: true, hasDiffRanges };
+  return await withGroupAsync("Computing PR diff ranges", async () => {
+    try {
+      return await computeAndPersistDiffRanges(branches, logger);
+    } catch (e) {
+      logger.warning(
+        `Failed to compute diff-informed analysis ranges: ${getErrorMessage(e)}`,
+      );
+      return false;
+    }
+  });
 }
 
 export interface DiffThunkRange {
diff --git a/src/overlay/diagnostics.ts b/src/overlay/diagnostics.ts
index 6bc11a73f..d350e38f3 100644
--- a/src/overlay/diagnostics.ts
+++ b/src/overlay/diagnostics.ts
@@ -39,6 +39,13 @@ export enum OverlayDisabledReason {
   NotPullRequestOrDefaultBranch = "not-pull-request-or-default-branch",
   /** The top-level overlay analysis feature flag is not enabled. */
   OverallFeatureNotEnabled = "overall-feature-not-enabled",
+  /**
+   * Overlay analysis was selected for a pull request, but the PR diff ranges
+   * needed for diff-informed analysis could not be computed. Overlay analysis
+   * has only been validated in combination with diff-informed analysis, so we
+   * fall back to a non-overlay analysis in this case.
+   */
+  PrDiffRangesNotComputed = "pr-diff-ranges-not-computed",
   /** Overlay analysis was skipped because it previously failed with similar hardware resources. */
   SkippedDueToCachedStatus = "skipped-due-to-cached-status",
   /** Disk usage could not be determined during the overlay status check. */