diff --git a/kernel/timeout.c b/kernel/timeout.c
index e94d8960fa6..e9231fa3ab8 100644
--- a/kernel/timeout.c
+++ b/kernel/timeout.c
@@ -84,10 +84,9 @@ static int32_t elapsed(void)
 	return announce_remaining == 0 ? sys_clock_elapsed() : 0U;
 }
 
-static int32_t next_timeout(void)
+static int32_t next_timeout(int32_t ticks_elapsed)
 {
 	struct _timeout *to = first();
-	int32_t ticks_elapsed = elapsed();
 	int32_t ret;
 
 	if ((to == NULL) ||
@@ -116,9 +115,13 @@ void z_add_timeout(struct _timeout *to, _timeout_func_t fn,
 
 	K_SPINLOCK(&timeout_lock) {
 		struct _timeout *t;
+		int32_t ticks_elapsed;
+		bool has_elapsed = false;
 
 		if (Z_IS_TIMEOUT_RELATIVE(timeout)) {
-			to->dticks = timeout.ticks + 1 + elapsed();
+			ticks_elapsed = elapsed();
+			has_elapsed = true;
+			to->dticks = timeout.ticks + 1 + ticks_elapsed;
 		} else {
 			k_ticks_t ticks = Z_TICK_ABS(timeout.ticks) - curr_tick;
 
@@ -139,7 +142,13 @@ void z_add_timeout(struct _timeout *to, _timeout_func_t fn,
 		}
 
 		if (to == first() && announce_remaining == 0) {
-			sys_clock_set_timeout(next_timeout(), false);
+			if (!has_elapsed) {
+				/* In case of absolute timeout that is first to expire
+				 * elapsed need to be read from the system clock.
+				 */
+				ticks_elapsed = elapsed();
+			}
+			sys_clock_set_timeout(next_timeout(ticks_elapsed), false);
 		}
 	}
 }
@@ -155,7 +164,7 @@ int z_abort_timeout(struct _timeout *to)
 			remove_timeout(to);
 			ret = 0;
 			if (is_first) {
-				sys_clock_set_timeout(next_timeout(), false);
+				sys_clock_set_timeout(next_timeout(elapsed()), false);
 			}
 		}
 	}
@@ -210,7 +219,7 @@ int32_t z_get_next_timeout_expiry(void)
 	int32_t ret = (int32_t) K_TICKS_FOREVER;
 
 	K_SPINLOCK(&timeout_lock) {
-		ret = next_timeout();
+		ret = next_timeout(elapsed());
 	}
 	return ret;
 }
@@ -257,7 +266,7 @@ void sys_clock_announce(int32_t ticks)
 	curr_tick += announce_remaining;
 	announce_remaining = 0;
 
-	sys_clock_set_timeout(next_timeout(), false);
+	sys_clock_set_timeout(next_timeout(0), false);
 
 	k_spin_unlock(&timeout_lock, key);