diff --git a/cns/ipampool/v2/adapter.go b/cns/ipampool/v2/adapter.go
index 3cc02d0e00..a04bec11c1 100644
--- a/cns/ipampool/v2/adapter.go
+++ b/cns/ipampool/v2/adapter.go
@@ -31,6 +31,14 @@ func (m *adapter) GetStateSnapshot() cns.IpamPoolMonitorStateSnapshot {
 
 func PodIPDemandListener(ch chan<- int) func([]v1.Pod) {
 	return func(pods []v1.Pod) {
-		ch <- len(pods)
+		// Filter out Pods in terminal phases (Succeeded/Failed) since they no longer
+		// have network sandboxes and don't contribute to IP demand
+		activePods := 0
+		for i := range pods {
+			if pods[i].Status.Phase != v1.PodSucceeded && pods[i].Status.Phase != v1.PodFailed {
+				activePods++
+			}
+		}
+		ch <- activePods
 	}
 }
diff --git a/cns/ipampool/v2/adapter_test.go b/cns/ipampool/v2/adapter_test.go
new file mode 100644
index 0000000000..70c3dfe15f
--- /dev/null
+++ b/cns/ipampool/v2/adapter_test.go
@@ -0,0 +1,100 @@
+package v2
+
+import (
+	"testing"
+
+	v1 "k8s.io/api/core/v1"
+	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+)
+
+func TestPodIPDemandListener(t *testing.T) {
+	tests := []struct {
+		name     string
+		pods     []v1.Pod
+		expected int
+	}{
+		{
+			name:     "empty pod list",
+			pods:     []v1.Pod{},
+			expected: 0,
+		},
+		{
+			name: "single running pod",
+			pods: []v1.Pod{
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod1"},
+					Status:     v1.PodStatus{Phase: v1.PodRunning},
+				},
+			},
+			expected: 1,
+		},
+		{
+			name: "multiple running pods",
+			pods: []v1.Pod{
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod1"},
+					Status:     v1.PodStatus{Phase: v1.PodRunning},
+				},
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod2"},
+					Status:     v1.PodStatus{Phase: v1.PodPending},
+				},
+			},
+			expected: 2,
+		},
+		{
+			name: "mix of running and terminal pods - should exclude terminal",
+			pods: []v1.Pod{
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod1"},
+					Status:     v1.PodStatus{Phase: v1.PodRunning},
+				},
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod2"},
+					Status:     v1.PodStatus{Phase: v1.PodSucceeded},
+				},
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod3"},
+					Status:     v1.PodStatus{Phase: v1.PodFailed},
+				},
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod4"},
+					Status:     v1.PodStatus{Phase: v1.PodPending},
+				},
+			},
+			expected: 2, // Only pod1 (Running) and pod4 (Pending) should be counted
+		},
+		{
+			name: "only terminal pods - should count zero",
+			pods: []v1.Pod{
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod1"},
+					Status:     v1.PodStatus{Phase: v1.PodSucceeded},
+				},
+				{
+					ObjectMeta: metav1.ObjectMeta{Name: "pod2"},
+					Status:     v1.PodStatus{Phase: v1.PodFailed},
+				},
+			},
+			expected: 0,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			ch := make(chan int, 1)
+			listener := PodIPDemandListener(ch)
+
+			listener(tt.pods)
+
+			select {
+			case result := <-ch:
+				if result != tt.expected {
+					t.Errorf("expected %d, got %d", tt.expected, result)
+				}
+			default:
+				t.Error("expected value in channel")
+			}
+		})
+	}
+}
diff --git a/cns/kubecontroller/pod/reconciler.go b/cns/kubecontroller/pod/reconciler.go
index 29142c2ef5..db817159d8 100644
--- a/cns/kubecontroller/pod/reconciler.go
+++ b/cns/kubecontroller/pod/reconciler.go
@@ -50,7 +50,7 @@ type limiter interface {
 	Allow() bool
 }
 
-// NotifierFunc returns a reconcile.Func that lists Pods to get the latest
+// NewNotifierFunc returns a reconcile.Func that lists Pods to get the latest
 // state and notifies listeners of the resulting Pods.
 // listOpts are passed to the client.List call to filter the Pod list.
 // limiter is an optional rate limiter which may be used to limit the
@@ -88,12 +88,23 @@ var hostNetworkIndexer = client.IndexerFunc(func(o client.Object) []string {
 	return []string{strconv.FormatBool(pod.Spec.HostNetwork)}
 })
 
+var statusPhaseIndexer = client.IndexerFunc(func(o client.Object) []string {
+	pod, ok := o.(*v1.Pod)
+	if !ok {
+		return nil
+	}
+	return []string{string(pod.Status.Phase)}
+})
+
 // SetupWithManager Sets up the reconciler with a new manager, filtering using NodeNetworkConfigFilter on nodeName.
 func (p *watcher) SetupWithManager(ctx context.Context, mgr ctrl.Manager) error {
 	p.cli = mgr.GetClient()
 	if err := mgr.GetFieldIndexer().IndexField(ctx, &v1.Pod{}, "spec.hostNetwork", hostNetworkIndexer); err != nil {
 		return errors.Wrap(err, "failed to set up hostNetwork indexer")
 	}
+	if err := mgr.GetFieldIndexer().IndexField(ctx, &v1.Pod{}, "status.phase", statusPhaseIndexer); err != nil {
+		return errors.Wrap(err, "failed to set up status.phase indexer")
+	}
 	if err := ctrl.NewControllerManagedBy(mgr).
 		For(&v1.Pod{}).
 		WithEventFilter(predicate.Funcs{ // we only want create/delete events