diff --git a/InventoryReservationCli/Command/Input/GetReservationFromCompensationArgument.php b/InventoryReservationCli/Command/Input/GetReservationFromCompensationArgument.php
index d367d995a74..70a0628c979 100644
--- a/InventoryReservationCli/Command/Input/GetReservationFromCompensationArgument.php
+++ b/InventoryReservationCli/Command/Input/GetReservationFromCompensationArgument.php
@@ -69,7 +69,7 @@ public function __construct(
      */
     private function parseArgument(string $argument): array
     {
-        $pattern = '/(?P<increment_id>.*):(?P<sku>.*):(?P<quantity>.*):(?P<stock_id>.*)/';
+        $pattern = '/(?P<increment_id>[^:]+):(?P<sku>.*):(?P<quantity>.*):(?P<stock_id>.*)/';
         if (preg_match($pattern, $argument, $match)) {
             return $match;
         }
@@ -92,6 +92,12 @@ public function execute(string $argument): ReservationInterface
             $this->searchCriteriaBuilder->addFilter('increment_id', $argumentParts['increment_id'], 'eq')->create()
         );
         $order = current($results->getItems());
+        
+        if (!$order) {
+            throw new InvalidArgumentException(
+                sprintf('Order with increment_id "%s" not found', $argumentParts['increment_id'])
+            );
+        }
 
         return $this->reservationBuilder
             ->setSku((string)$argumentParts['sku'])
diff --git a/InventoryReservationCli/Test/Integration/Model/AppendReservationsTest.php b/InventoryReservationCli/Test/Integration/Model/AppendReservationsTest.php
index 6642d86535e..de70b404b74 100644
--- a/InventoryReservationCli/Test/Integration/Model/AppendReservationsTest.php
+++ b/InventoryReservationCli/Test/Integration/Model/AppendReservationsTest.php
@@ -105,6 +105,120 @@ public function testCompensateMissingReservationsConfigurableProductCustomStock(
         self::assertCount(0, $inconsistencies);
     }
 
+    /**
+     * Verify create-compensations command handles SKUs with colons and semicolons correctly.
+     * This tests the core functionality of PR #3404 and extends it to cover semicolons.
+     *
+     * @magentoDataFixture Magento_InventorySalesApi::Test/_files/websites_with_stores.php
+     * @magentoDataFixture Magento_InventoryApi::Test/_files/sources.php
+     * @magentoDataFixture Magento_InventoryApi::Test/_files/stocks.php
+     * @magentoDataFixture Magento_InventoryApi::Test/_files/stock_source_links.php
+     * @magentoDataFixture Magento_InventorySalesApi::Test/_files/stock_website_sales_channels.php
+     * @magentoDataFixture Magento_InventoryConfigurableProduct::Test/_files/product_configurable.php
+     * @magentoDataFixture Magento_InventoryConfigurableProduct::Test/_files/source_items_configurable.php
+     * @magentoDataFixture Magento_InventoryIndexer::Test/_files/reindex_inventory.php
+     * @magentoDataFixture Magento_InventoryShipping::Test/_files/create_quote_on_us_website.php
+     * @magentoDataFixture Magento_InventoryShipping::Test/_files/order_configurable_product.php
+     * @magentoDbIsolation disabled
+     *
+     * @return void
+     */
+    public function testCompensateMissingReservationsWithSpecialCharactersInSku(): void
+    {
+        $orderRepository = ObjectManager::getInstance()->get(OrderRepositoryInterface::class);
+        $searchCriteriaBuilder = ObjectManager::getInstance()->get(SearchCriteriaBuilder::class);
+        
+        $searchCriteria = $searchCriteriaBuilder
+            ->addFilter('increment_id', 'created_order_for_test')
+            ->create();
+        
+        $order = current($orderRepository->getList($searchCriteria)->getItems());
+        $this->assertNotFalse($order, 'Order should exist for testing');
+        
+        // Test various argument formats with SKUs containing colons and semicolons
+        $testCases = [
+            'simple_colon' => [
+                'sku' => 'test:product:with:colons',
+                'quantity' => 2.0,
+                'stockId' => 1
+            ],
+            'complex_colon' => [
+                'sku' => 'brand:category:product:variant',
+                'quantity' => 1.0,
+                'stockId' => 1
+            ],
+            'leading_colon' => [
+                'sku' => ':product_with_leading_colon',
+                'quantity' => 1.5,
+                'stockId' => 1
+            ],
+            'simple_semicolon' => [
+                'sku' => 'test;product;with;semicolons',
+                'quantity' => 3.0,
+                'stockId' => 1
+            ],
+            'complex_semicolon' => [
+                'sku' => 'brand;category;product;variant',
+                'quantity' => 2.5,
+                'stockId' => 1
+            ],
+            'mixed_special_chars' => [
+                'sku' => 'product:variant;version-1.0_test',
+                'quantity' => 1.0,
+                'stockId' => 1
+            ],
+            'leading_semicolon' => [
+                'sku' => ';product_with_leading_semicolon',
+                'quantity' => 0.5,
+                'stockId' => 1
+            ]
+        ];
+        
+        foreach ($testCases as $testName => $testData) {
+            $argument = sprintf(
+                '%s:%s:-%s:%d',
+                $order->getIncrementId(),
+                $testData['sku'],
+                $testData['quantity'],
+                $testData['stockId']
+            );
+            
+            try {
+                $reservation = $this->getReservationFromCompensationArgument->execute($argument);
+                
+                // Verify the reservation was created correctly
+                $this->assertInstanceOf(
+                    \Magento\InventoryReservationsApi\Model\ReservationInterface::class,
+                    $reservation,
+                    "Failed to create reservation for test case: {$testName}"
+                );
+                
+                $this->assertEquals(
+                    $testData['sku'],
+                    $reservation->getSku(),
+                    "SKU mismatch for test case: {$testName}"
+                );
+                
+                $this->assertEquals(
+                    -$testData['quantity'],
+                    $reservation->getQuantity(),
+                    "Quantity mismatch for test case: {$testName}"
+                );
+                
+                $this->assertEquals(
+                    $testData['stockId'],
+                    $reservation->getStockId(),
+                    "Stock ID mismatch for test case: {$testName}"
+                );
+                
+            } catch (\Exception $e) {
+                $errorMessage = "Failed to process argument with special character SKU for test case '{$testName}': ";
+                $fullMessage = $errorMessage . $e->getMessage() . " | Argument: {$argument}";
+                $this->fail($fullMessage);
+            }
+        }
+    }
+
     /**
      * Load current Inconsistencies
      *