diff --git a/esphome/core/application.cpp b/esphome/core/application.cpp
index 449acc64cf..2b84b1c1e4 100644
--- a/esphome/core/application.cpp
+++ b/esphome/core/application.cpp
@@ -132,7 +132,7 @@ void Application::setup() {
       this->after_loop_tasks_();
       this->app_state_ = new_app_state;
       yield();
-    } while (!component->can_proceed());
+    } while (!component->can_proceed() && !component->is_failed());
   }
 
   ESP_LOGI(TAG, "setup() finished successfully!");