diff --git a/server/src/main/java/org/elasticsearch/cluster/metadata/MetadataIndexTemplateService.java b/server/src/main/java/org/elasticsearch/cluster/metadata/MetadataIndexTemplateService.java
index 4aa8e5dfa551e..19df34cd80fbf 100644
--- a/server/src/main/java/org/elasticsearch/cluster/metadata/MetadataIndexTemplateService.java
+++ b/server/src/main/java/org/elasticsearch/cluster/metadata/MetadataIndexTemplateService.java
@@ -34,6 +34,7 @@
 import org.elasticsearch.common.settings.IndexScopedSettings;
 import org.elasticsearch.common.settings.Settings;
 import org.elasticsearch.common.util.set.Sets;
+import org.elasticsearch.core.Assertions;
 import org.elasticsearch.core.Nullable;
 import org.elasticsearch.core.TimeValue;
 import org.elasticsearch.core.Tuple;
@@ -818,7 +819,7 @@ void validateIndexTemplateV2(ProjectMetadata projectMetadata, String name, Compo
         var templateToValidate = indexTemplate.toBuilder().template(Template.builder(finalTemplate).settings(finalSettings)).build();
 
         validate(name, templateToValidate, additionalSettings);
-        validateDataStreamsStillReferenced(projectMetadata, name, templateToValidate);
+        maybeValidateDataStreamsStillReferenced(projectMetadata, name, templateToValidate);
         validateLifecycle(componentTemplates, name, templateToValidate, globalRetentionSettings.get(false));
         validateDataStreamOptions(componentTemplates, name, templateToValidate, globalRetentionSettings.get(true));
 
@@ -944,6 +945,43 @@ static void validateDataStreamOptions(
         }
     }
 
+    /**
+     * Maybe runs {@link #validateDataStreamsStillReferenced} if it looks like the new composite template could change data stream coverage.
+     */
+    private static void maybeValidateDataStreamsStillReferenced(
+        ProjectMetadata project,
+        String templateName,
+        ComposableIndexTemplate newTemplate
+    ) {
+        final ComposableIndexTemplate existingTemplate = project.templatesV2().get(templateName);
+        final Settings existingSettings = Optional.ofNullable(existingTemplate)
+            .map(ComposableIndexTemplate::template)
+            .map(Template::settings)
+            .orElse(Settings.EMPTY);
+        final Settings newSettings = Optional.ofNullable(newTemplate)
+            .map(ComposableIndexTemplate::template)
+            .map(Template::settings)
+            .orElse(Settings.EMPTY);
+        // We check whether anything relevant has changed that could affect data stream coverage and return early if not.
+        // These checks are based on the implementation of findV2Template and the data stream template check in this method.
+        // If we're adding a new template, we do the full check in case this template's priority changes coverage.
+        if (existingTemplate != null
+            && Objects.equals(existingTemplate.indexPatterns(), newTemplate.indexPatterns())
+            && Objects.equals(existingSettings.get(IndexMetadata.SETTING_INDEX_HIDDEN), newSettings.get(IndexMetadata.SETTING_INDEX_HIDDEN))
+            && Objects.equals(existingTemplate.getDataStreamTemplate() != null, newTemplate.getDataStreamTemplate() != null)
+            && Objects.equals(existingTemplate.priorityOrZero(), newTemplate.priorityOrZero())) {
+            if (Assertions.ENABLED) {
+                try {
+                    validateDataStreamsStillReferenced(project, templateName, newTemplate);
+                } catch (IllegalArgumentException e) {
+                    assert false : "Data stream reference validation took a shortcut but the full check failed: " + e.getMessage();
+                }
+            }
+            return;
+        }
+        validateDataStreamsStillReferenced(project, templateName, newTemplate);
+    }
+
     /**
      * Validate that by changing or adding {@code newTemplate}, there are
      * no unreferenced data streams. Note that this scenario is still possible
@@ -955,18 +993,16 @@ private static void validateDataStreamsStillReferenced(
         String templateName,
         ComposableIndexTemplate newTemplate
     ) {
-        final Set<String> dataStreams = project.dataStreams()
-            .entrySet()
-            .stream()
-            .filter(entry -> entry.getValue().isSystem() == false)
-            .map(Map.Entry::getKey)
-            .collect(Collectors.toSet());
-
         Function<Map<String, ComposableIndexTemplate>, Set<String>> findUnreferencedDataStreams = composableTemplates -> {
             final Set<String> unreferenced = new HashSet<>();
             // For each data stream that we have, see whether it's covered by a different
             // template (which is great), or whether it's now uncovered by any template
-            for (String dataStream : dataStreams) {
+            for (var dataStreamEntry : project.dataStreams().entrySet()) {
+                // Exclude system data streams
+                if (dataStreamEntry.getValue().isSystem()) {
+                    continue;
+                }
+                final String dataStream = dataStreamEntry.getKey();
                 final String matchingTemplate = findV2Template(project, composableTemplates.entrySet(), dataStream, false, false);
                 if (matchingTemplate == null) {
                     unreferenced.add(dataStream);