diff --git a/lib/datadog/ci/contrib/rspec/example.rb b/lib/datadog/ci/contrib/rspec/example.rb
index b060f549..8c3b5da7 100644
--- a/lib/datadog/ci/contrib/rspec/example.rb
+++ b/lib/datadog/ci/contrib/rspec/example.rb
@@ -21,42 +21,25 @@ def run(*args)
               return super if ::RSpec.configuration.dry_run? && !datadog_configuration[:dry_run_enabled]
               return super unless datadog_configuration[:enabled]
 
-              test_name = full_description.strip
-              if metadata[:description].empty?
-                # for unnamed it blocks this appends something like "example at ./spec/some_spec.rb:10"
-                test_name << " #{description}"
-              end
-
-              test_suite_description = fetch_top_level_example_group[:description]
-              suite_name = "#{test_suite_description} at #{metadata[:example_group][:rerun_file_path]}"
-
-              # remove example group description from test name to avoid duplication
-              test_name = test_name.sub(test_suite_description, "").strip
-
-              if ci_queue?
-                suite_name = "#{suite_name} (ci-queue running example [#{test_name}])"
-                ci_queue_test_span = test_visibility_component.start_test_suite(suite_name)
-              end
+              test_suite_span = test_visibility_component.start_test_suite(datadog_test_suite_name) if ci_queue?
 
               # don't report test to RSpec::Core::Reporter until retries are done
               @skip_reporting = true
 
               test_retries_component.with_retries do
                 test_visibility_component.trace_test(
-                  test_name,
-                  suite_name,
+                  datadog_test_name,
+                  datadog_test_suite_name,
                   tags: {
                     CI::Ext::Test::TAG_FRAMEWORK => Ext::FRAMEWORK,
                     CI::Ext::Test::TAG_FRAMEWORK_VERSION => datadog_integration.version.to_s,
                     CI::Ext::Test::TAG_SOURCE_FILE => Git::LocalRepository.relative_to_root(metadata[:file_path]),
                     CI::Ext::Test::TAG_SOURCE_START => metadata[:line_number].to_s,
-                    CI::Ext::Test::TAG_PARAMETERS => Utils::TestRun.test_parameters(
-                      metadata: {"scoped_id" => metadata[:scoped_id]}
-                    )
+                    CI::Ext::Test::TAG_PARAMETERS => datadog_test_parameters
                   },
                   service: datadog_configuration[:service_name]
                 ) do |test_span|
-                  test_span&.itr_unskippable! if metadata[CI::Ext::Test::ITR_UNSKIPPABLE_OPTION]
+                  test_span&.itr_unskippable! if datadog_unskippable?
 
                   metadata[:skip] = CI::Ext::Test::ITR_TEST_SKIP_REASON if test_span&.skipped_by_itr?
 
@@ -87,8 +70,8 @@ def run(*args)
                 end
               end
 
-              # this is a special case for ci-queue, we need to finish the test suite span
-              ci_queue_test_span&.finish
+              # this is a special case for ci-queue, we need to finish the test suite span created for a single test
+              test_suite_span&.finish
 
               # after retries are done, we can finally report the test to RSpec
               @skip_reporting = false
@@ -106,6 +89,18 @@ def finish(reporter)
               super(::RSpec::Core::NullReporter)
             end
 
+            def datadog_test_id
+              @datadog_test_id ||= Utils::TestRun.datadog_test_id(
+                datadog_test_name,
+                datadog_test_suite_name,
+                datadog_test_parameters
+              )
+            end
+
+            def datadog_unskippable?
+              !!metadata[CI::Ext::Test::ITR_UNSKIPPABLE_OPTION]
+            end
+
             private
 
             def fetch_top_level_example_group
@@ -129,6 +124,45 @@ def datadog_configuration
               Datadog.configuration.ci[:rspec]
             end
 
+            def datadog_test_suite_description
+              @datadog_test_suite_description ||= fetch_top_level_example_group[:description]
+            end
+
+            def datadog_test_name
+              return @datadog_test_name if defined?(@datadog_test_name)
+
+              test_name = full_description.strip
+              if metadata[:description].empty?
+                # for unnamed it blocks this appends something like "example at ./spec/some_spec.rb:10"
+                test_name << " #{description}"
+              end
+
+              # remove example group description from test name to avoid duplication
+              test_name = test_name.sub(datadog_test_suite_description, "").strip
+
+              @datadog_test_name = test_name
+            end
+
+            def datadog_test_suite_name
+              return @datadog_test_suite_name if defined?(@datadog_test_suite_name)
+
+              suite_name = "#{datadog_test_suite_description} at #{metadata[:example_group][:rerun_file_path]}"
+
+              if ci_queue?
+                suite_name = "#{suite_name} (ci-queue running example [#{datadog_test_name}])"
+              end
+
+              @datadog_test_suite_name = suite_name
+            end
+
+            def datadog_test_parameters
+              return @datadog_test_parameters if defined?(@datadog_test_parameters)
+
+              @datadog_test_parameters = Utils::TestRun.test_parameters(
+                metadata: {"scoped_id" => metadata[:scoped_id]}
+              )
+            end
+
             def test_visibility_component
               Datadog.send(:components).test_visibility
             end
diff --git a/lib/datadog/ci/contrib/rspec/example_group.rb b/lib/datadog/ci/contrib/rspec/example_group.rb
index 35a38f74..5050a2b3 100644
--- a/lib/datadog/ci/contrib/rspec/example_group.rb
+++ b/lib/datadog/ci/contrib/rspec/example_group.rb
@@ -18,10 +18,17 @@ module ClassMethods
             def run(reporter = ::RSpec::Core::NullReporter)
               return super if ::RSpec.configuration.dry_run? && !datadog_configuration[:dry_run_enabled]
               return super unless datadog_configuration[:enabled]
+
+              # skip the context hooks if all descendant example are going to be skipped
+              # IMPORTANT: must happen before top_level? check because skipping hooks must happen
+              # even if it is a nested context
+              metadata[:skip] = true if all_examples_skipped_by_datadog?
+
+              # return early because we create Datadog::CI::TestSuite only for top-level example groups
               return super unless top_level?
 
               suite_name = "#{description} at #{file_path}"
-              test_suite = test_visibility_component.start_test_suite(
+              test_suite = test_visibility_component&.start_test_suite(
                 suite_name,
                 tags: {
                   CI::Ext::Test::TAG_SOURCE_FILE => Git::LocalRepository.relative_to_root(metadata[:file_path]),
@@ -47,6 +54,12 @@ def run(reporter = ::RSpec::Core::NullReporter)
 
             private
 
+            def all_examples_skipped_by_datadog?
+              descendant_filtered_examples.all? do |example|
+                !example.datadog_unskippable? && test_optimisation_component&.skippable?(example)
+              end
+            end
+
             def datadog_configuration
               Datadog.configuration.ci[:rspec]
             end
@@ -54,6 +67,10 @@ def datadog_configuration
             def test_visibility_component
               Datadog.send(:components).test_visibility
             end
+
+            def test_optimisation_component
+              Datadog.send(:components).test_optimisation
+            end
           end
         end
       end
diff --git a/lib/datadog/ci/test.rb b/lib/datadog/ci/test.rb
index 00912e43..d5d47b81 100644
--- a/lib/datadog/ci/test.rb
+++ b/lib/datadog/ci/test.rb
@@ -17,6 +17,11 @@ def name
         get_tag(Ext::Test::TAG_NAME)
       end
 
+      # @return [String] the test id according to Datadog's test impact analysis.
+      def datadog_test_id
+        @datadog_test_id ||= Utils::TestRun.datadog_test_id(name, test_suite_name, parameters)
+      end
+
       # Finishes the current test.
       # @return [void]
       def finish
@@ -140,22 +145,18 @@ def parameters
 
       # @internal
       def any_retry_passed?
-        !!test_suite&.any_test_retry_passed?(test_id)
+        !!test_suite&.any_test_retry_passed?(datadog_test_id)
       end
 
       private
 
-      def test_id
-        @test_id ||= Utils::TestRun.datadog_test_id(name, test_suite_name, parameters)
-      end
-
       def record_test_result(datadog_status)
         # if this test was already executed in this test suite, mark it as retried
-        if test_suite&.test_executed?(test_id)
+        if test_suite&.test_executed?(datadog_test_id)
           set_tag(Ext::Test::TAG_IS_RETRY, "true")
         end
 
-        test_suite&.record_test_result(test_id, datadog_status)
+        test_suite&.record_test_result(datadog_test_id, datadog_status)
       end
     end
   end
diff --git a/lib/datadog/ci/test_optimisation/component.rb b/lib/datadog/ci/test_optimisation/component.rb
index 562ca6c9..e13add52 100644
--- a/lib/datadog/ci/test_optimisation/component.rb
+++ b/lib/datadog/ci/test_optimisation/component.rb
@@ -144,11 +144,16 @@ def stop_coverage(test)
           event
         end
 
+        def skippable?(test)
+          return false if !enabled? || !skipping_tests?
+
+          @skippable_tests.include?(test.datadog_test_id)
+        end
+
         def mark_if_skippable(test)
           return if !enabled? || !skipping_tests?
 
-          datadog_test_id = Utils::TestRun.datadog_test_id(test.name, test.test_suite_name, test.parameters)
-          if @skippable_tests.include?(datadog_test_id)
+          if skippable?(test)
             if forked?
               Datadog.logger.warn { "Intelligent test runner is not supported for forking test runners yet" }
               return
@@ -156,9 +161,9 @@ def mark_if_skippable(test)
 
             test.set_tag(Ext::Test::TAG_ITR_SKIPPED_BY_ITR, "true")
 
-            Datadog.logger.debug { "Marked test as skippable: #{datadog_test_id}" }
+            Datadog.logger.debug { "Marked test as skippable: #{test.datadog_test_id}" }
           else
-            Datadog.logger.debug { "Test is not skippable: #{datadog_test_id}" }
+            Datadog.logger.debug { "Test is not skippable: #{test.datadog_test_id}" }
           end
         end
 
diff --git a/sig/datadog/ci/contrib/rspec/example.rbs b/sig/datadog/ci/contrib/rspec/example.rbs
index d324d9bd..35d59ec6 100644
--- a/sig/datadog/ci/contrib/rspec/example.rbs
+++ b/sig/datadog/ci/contrib/rspec/example.rbs
@@ -7,8 +7,18 @@ module Datadog
           module InstanceMethods : ::RSpec::Core::Example
             @skip_reporting: bool
 
+            @datadog_test_suite_description: String
+
+            @datadog_test_id: String
+            @datadog_test_name: String
+            @datadog_test_suite_name: String
+            @datadog_test_parameters: String
+
             def run: (untyped example_group_instance, untyped reporter) -> untyped
 
+            def datadog_test_id: () -> String
+            def datadog_unskippable?: () -> bool
+
             private
 
             def fetch_top_level_example_group: () -> Hash[Symbol, untyped]
@@ -17,6 +27,11 @@ module Datadog
             def test_visibility_component: () -> Datadog::CI::TestVisibility::Component
             def test_retries_component: () -> Datadog::CI::TestRetries::Component
             def ci_queue?: () -> bool
+
+            def datadog_test_suite_description: () -> String
+            def datadog_test_name: () -> String
+            def datadog_test_suite_name: () -> String
+            def datadog_test_parameters: () -> String
           end
         end
       end
diff --git a/sig/datadog/ci/contrib/rspec/example_group.rbs b/sig/datadog/ci/contrib/rspec/example_group.rbs
index 4571dc2c..9cadcd98 100644
--- a/sig/datadog/ci/contrib/rspec/example_group.rbs
+++ b/sig/datadog/ci/contrib/rspec/example_group.rbs
@@ -12,9 +12,13 @@ module Datadog
 
             private
 
+            def all_examples_skipped_by_datadog?: () -> bool
+
             def datadog_configuration: () -> untyped
 
-            def test_visibility_component: () -> Datadog::CI::TestVisibility::Component
+            def test_visibility_component: () -> Datadog::CI::TestVisibility::Component?
+
+            def test_optimisation_component: () -> Datadog::CI::TestOptimisation::Component?
           end
         end
       end
diff --git a/sig/datadog/ci/test.rbs b/sig/datadog/ci/test.rbs
index 0c2aaef6..63aaf06c 100644
--- a/sig/datadog/ci/test.rbs
+++ b/sig/datadog/ci/test.rbs
@@ -1,8 +1,9 @@
 module Datadog
   module CI
     class Test < Span
-      @test_id: String
+      @datadog_test_id: String
 
+      def datadog_test_id: () -> String
       def finish: () -> void
       def test_suite: () -> Datadog::CI::TestSuite?
       def test_suite_id: () -> String?
@@ -17,7 +18,6 @@ module Datadog
 
       private
 
-      def test_id: () -> String
       def record_test_result: (String datadog_status) -> void
     end
   end
diff --git a/sig/datadog/ci/test_optimisation/component.rbs b/sig/datadog/ci/test_optimisation/component.rbs
index afbd7bf8..0a745c61 100644
--- a/sig/datadog/ci/test_optimisation/component.rbs
+++ b/sig/datadog/ci/test_optimisation/component.rbs
@@ -45,6 +45,8 @@ module Datadog
 
         def stop_coverage: (Datadog::CI::Test test) -> Datadog::CI::TestOptimisation::Coverage::Event?
 
+        def skippable?: (Datadog::CI::Test test) -> bool
+
         def mark_if_skippable: (Datadog::CI::Test test) -> void
 
         def count_skipped_test: (Datadog::CI::Test test) -> void
diff --git a/spec/datadog/ci/contrib/rspec/instrumentation_spec.rb b/spec/datadog/ci/contrib/rspec/instrumentation_spec.rb
index 22e2c1ae..957bb716 100644
--- a/spec/datadog/ci/contrib/rspec/instrumentation_spec.rb
+++ b/spec/datadog/ci/contrib/rspec/instrumentation_spec.rb
@@ -2,6 +2,8 @@
 
 RSpec.describe "RSpec instrumentation" do
   let(:integration) { Datadog::CI::Contrib::Instrumentation.fetch_integration(:rspec) }
+  let(:before_all_spy) { spy(:before_all, call: nil) }
+  let(:before_context_spy) { spy(:before_context, call: nil) }
 
   before do
     # expect that public manual API isn't used
@@ -18,6 +20,7 @@ def rspec_session_run(
     with_flaky_test: false,
     with_canceled_test: false,
     with_flaky_test_that_fails_once: false,
+    with_test_outside_context: false,
     unskippable: {
       test: false,
       context: false,
@@ -36,10 +39,20 @@ def rspec_session_run(
     flaky_test_that_fails_once_passes = 0
 
     current_let_value = 0
+    before_all_spy_local = before_all_spy
+    before_context_spy_local = before_context_spy
 
     with_new_rspec_environment do
       spec = RSpec.describe "SomeTest", suite_meta do
+        before(:all) do
+          before_all_spy_local.call
+        end
+
         context "nested", context_meta do
+          before(:all) do
+            before_context_spy_local.call
+          end
+
           let(:let_value) { current_let_value += 1 }
 
           it "foo", test_meta do
@@ -94,6 +107,12 @@ def rspec_session_run(
             end
           end
         end
+
+        if with_test_outside_context
+          it "is outside of context" do
+            expect(1 + 1).to eq(2)
+          end
+        end
       end
 
       options_array = %w[--pattern none]
@@ -150,7 +169,7 @@ def rspec_session_run(
         :source_file,
         "spec/datadog/ci/contrib/rspec/instrumentation_spec.rb"
       )
-      expect(first_test_span).to have_test_tag(:source_start, "123")
+      expect(first_test_span).to have_test_tag(:source_start, "142")
       expect(first_test_span).to have_test_tag(
         :codeowners,
         "[\"@DataDog/ruby-guild\", \"@DataDog/ci-app-libraries\"]"
@@ -580,7 +599,7 @@ def expect_failure
         :source_file,
         "spec/datadog/ci/contrib/rspec/instrumentation_spec.rb"
       )
-      expect(first_test_suite_span).to have_test_tag(:source_start, "41")
+      expect(first_test_suite_span).to have_test_tag(:source_start, "46")
       expect(first_test_suite_span).to have_test_tag(
         :codeowners,
         "[\"@DataDog/ruby-guild\", \"@DataDog/ci-app-libraries\"]"
@@ -751,6 +770,13 @@ def rspec_skipped_session_run
         expect(itr_skipped_test).to have_test_tag(:itr_skipped_by_itr, "true")
       end
 
+      it "runs context hooks" do
+        rspec_session_run(with_failed_test: true)
+
+        expect(before_all_spy).to have_received(:call)
+        expect(before_context_spy).to have_received(:call)
+      end
+
       it "sends test session level tags" do
         rspec_session_run(with_failed_test: true)
 
@@ -785,6 +811,27 @@ def rspec_skipped_session_run
         expect(test_session_span).to have_test_tag(:itr_test_skipping_count, 2)
       end
 
+      it "does not run context hooks" do
+        rspec_session_run(with_failed_test: true)
+
+        expect(before_all_spy).not_to have_received(:call)
+        expect(before_context_spy).not_to have_received(:call)
+      end
+
+      it "runs top-level hook when there is a test not skipped by datadog, but it skips hooks for the context where all tests are skipped" do
+        rspec_session_run(with_failed_test: true, with_test_outside_context: true)
+
+        expect(before_all_spy).to have_received(:call)
+        expect(before_context_spy).not_to have_received(:call)
+      end
+
+      it "runs context hook if any test is marked unskippable" do
+        rspec_session_run(with_failed_test: true, unskippable: {test: true})
+
+        expect(before_all_spy).to have_received(:call)
+        expect(before_context_spy).to have_received(:call)
+      end
+
       context "but some tests are unskippable" do
         context "when a test is unskippable" do
           it "runs the test and adds forced run tag" do
diff --git a/spec/datadog/ci/test_visibility/transport_spec.rb b/spec/datadog/ci/test_visibility/transport_spec.rb
index e241ed22..4d0cfe40 100644
--- a/spec/datadog/ci/test_visibility/transport_spec.rb
+++ b/spec/datadog/ci/test_visibility/transport_spec.rb
@@ -209,9 +209,9 @@
       end
 
       context "when chunking is used" do
-        # one test event is approximately 1000 bytes currently
+        # one test event is approximately 1200 bytes currently
         # ATTENTION: might break if more data is added to test spans in #produce_test_trace method
-        let(:max_payload_size) { 2000 }
+        let(:max_payload_size) { 2500 }
 
         it "sends events in two chunks" do
           responses = subject
diff --git a/vendor/rbs/rspec/0/rspec.rbs b/vendor/rbs/rspec/0/rspec.rbs
index f4f228ca..5bdc9847 100644
--- a/vendor/rbs/rspec/0/rspec.rbs
+++ b/vendor/rbs/rspec/0/rspec.rbs
@@ -46,6 +46,7 @@ module RSpec::Core::ExampleGroup
     def file_path: () -> String
     def description: () -> String
     def metadata: () -> untyped
+    def descendant_filtered_examples: () -> Array[untyped]
   end
 end