diff --git a/e2e/testcases/otel_collector_test.go b/e2e/testcases/otel_collector_test.go
index 47d91e97de..c30f933335 100644
--- a/e2e/testcases/otel_collector_test.go
+++ b/e2e/testcases/otel_collector_test.go
@@ -47,7 +47,7 @@ import (
 const (
 	DefaultMonitorKSA     = "default"
 	MonitorGSA            = "e2e-test-metric-writer"
-	GCMExportErrorCaption = "failed to export time series to GCM"
+	GCMExportErrorCaption = "One or more TimeSeries could not be written"
 	GCMMetricPrefix       = "custom.googleapis.com/opencensus/config_sync"
 )
 
diff --git a/e2e/testdata/otel-collector/otel-cm-monarch-rejected-labels.yaml b/e2e/testdata/otel-collector/otel-cm-monarch-rejected-labels.yaml
index d32d7525a1..1a559cd65e 100644
--- a/e2e/testdata/otel-collector/otel-cm-monarch-rejected-labels.yaml
+++ b/e2e/testdata/otel-collector/otel-cm-monarch-rejected-labels.yaml
@@ -51,8 +51,6 @@ data:
           - prefix: "host.name"
           - prefix: "k8s.deployment.name"
           - prefix: "k8s.node.name"
-        retry_on_failure:
-          enabled: false
         sending_queue:
           enabled: false
       googlecloud/kubernetes:
@@ -72,8 +70,6 @@ data:
           # will not break this ingestion pipeline
           create_service_timeseries: true
           service_resource_labels: false
-        retry_on_failure:
-          enabled: false
         sending_queue:
           enabled: false
     processors:
diff --git a/manifests/templates/otel-collector.yaml b/manifests/templates/otel-collector.yaml
index 89e9533931..6f27ee896e 100644
--- a/manifests/templates/otel-collector.yaml
+++ b/manifests/templates/otel-collector.yaml
@@ -130,11 +130,14 @@ spec:
     spec:
       containers:
       - name: otel-collector
-        image: gcr.io/config-management-release/otelcontribcol:v0.54.0-gke.1
+        image: gcr.io/config-management-release/otelcontribcol:v0.86.0-gke.1
         command:
         - /otelcontribcol
         args:
         - "--config=/conf/otel-collector-config.yaml"
+        # The prometheus transformer appends `_ratio` to gauge metrics: https://github.com/open-telemetry/opentelemetry-collector-contrib/blob/v0.86.0/pkg/translator/prometheus/normalize_name.go#L149
+        # Add the feature gate to enable metric suffix trimming.
+        - "--feature-gates=-pkg.translator.prometheus.NormalizeName"
         resources:
           limits:
             cpu: 1
diff --git a/manifests/templates/reconciler-manager-configmap.yaml b/manifests/templates/reconciler-manager-configmap.yaml
index e7e869e736..514ecff62c 100644
--- a/manifests/templates/reconciler-manager-configmap.yaml
+++ b/manifests/templates/reconciler-manager-configmap.yaml
@@ -181,7 +181,7 @@ data:
                cpu: "50m"
                memory: "200Mi"
          - name: otel-agent
-           image: gcr.io/config-management-release/otelcontribcol:v0.54.0-gke.1
+           image: gcr.io/config-management-release/otelcontribcol:v0.86.0-gke.1
            command:
            - /otelcontribcol
            args:
diff --git a/manifests/templates/reconciler-manager.yaml b/manifests/templates/reconciler-manager.yaml
index fbb74636cf..35827e0164 100644
--- a/manifests/templates/reconciler-manager.yaml
+++ b/manifests/templates/reconciler-manager.yaml
@@ -60,14 +60,14 @@ spec:
               name: reconciler-manager
               optional: true  # Currently nothing mandatory in the ConfigMap
       - name: otel-agent
-        image: gcr.io/config-management-release/otelcontribcol:v0.54.0-gke.1
+        image: gcr.io/config-management-release/otelcontribcol:v0.86.0-gke.1
         command:
         - /otelcontribcol
         args:
         - "--config=/conf/otel-agent-config.yaml"
-        # TODO: Remove this feature gate when opentelemetry semantic conventions are used
-        # in the collector code.
-        - "--feature-gates=-exporter.googlecloud.OTLPDirect"
+        # The prometheus transformer appends `_ratio` to gauge metrics: https://github.com/open-telemetry/opentelemetry-collector-contrib/blob/v0.86.0/pkg/translator/prometheus/normalize_name.go#L149
+        # Add the feature gate to enable metric suffix trimming.
+        - "--feature-gates=-pkg.translator.prometheus.NormalizeName"
         resources:
           limits:
             cpu: 1
diff --git a/manifests/third_party/resourcegroup-manifest.yaml b/manifests/third_party/resourcegroup-manifest.yaml
index 8543b3f928..fd3a29630f 100644
--- a/manifests/third_party/resourcegroup-manifest.yaml
+++ b/manifests/third_party/resourcegroup-manifest.yaml
@@ -555,7 +555,7 @@ spec:
               fieldPath: metadata.labels['configsync.gke.io/deployment-name']
         - name: OTEL_RESOURCE_ATTRIBUTES
           value: k8s.pod.name=$(KUBE_POD_NAME),k8s.pod.namespace=$(KUBE_POD_NAMESPACE),k8s.pod.uid=$(KUBE_POD_UID),k8s.pod.ip=$(KUBE_POD_IP),k8s.node.name=$(KUBE_NODE_NAME),k8s.deployment.name=$(KUBE_DEPLOYMENT_NAME)
-        image: gcr.io/config-management-release/otelcontribcol:v0.54.0-gke.1
+        image: gcr.io/config-management-release/otelcontribcol:v0.86.0-gke.1
         name: otel-agent
         ports:
         - containerPort: 55678
diff --git a/pkg/metrics/otel.go b/pkg/metrics/otel.go
index 6877c194cd..155c961f23 100644
--- a/pkg/metrics/otel.go
+++ b/pkg/metrics/otel.go
@@ -67,8 +67,6 @@ exporters:
         - prefix: "host.name"
         - prefix: "k8s.deployment.name"
         - prefix: "k8s.node.name"
-    retry_on_failure:
-      enabled: false
     sending_queue:
       enabled: false
   googlecloud/kubernetes:
@@ -88,8 +86,6 @@ exporters:
       # will not break this ingestion pipeline
       create_service_timeseries: true
       service_resource_labels: false
-    retry_on_failure:
-      enabled: false
     sending_queue:
       enabled: false
 processors:
diff --git a/pkg/reconcilermanager/controllers/otel_controller_test.go b/pkg/reconcilermanager/controllers/otel_controller_test.go
index 056c524137..26ddfee82a 100644
--- a/pkg/reconcilermanager/controllers/otel_controller_test.go
+++ b/pkg/reconcilermanager/controllers/otel_controller_test.go
@@ -46,7 +46,7 @@ const (
 	// otel-collector ConfigMap.
 	// See `CollectorConfigGooglecloud` in `pkg/metrics/otel.go`
 	// Used by TestOtelReconcilerGooglecloud.
-	depAnnotationGooglecloud = "de02e5c1da70cff63a1cfb565141899a"
+	depAnnotationGooglecloud = "017f802612f7bbbac7a90fc8d64ce746"
 	// depAnnotationGooglecloud is the expected hash of the custom
 	// otel-collector ConfigMap test artifact.
 	// Used by TestOtelReconcilerCustom.