diff --git a/lua/cp/ansi.lua b/lua/cp/ansi.lua
new file mode 100644
index 0000000..0381b91
--- /dev/null
+++ b/lua/cp/ansi.lua
@@ -0,0 +1,183 @@
+---@class AnsiParseResult
+---@field lines string[]
+---@field highlights table[]
+
+local M = {}
+
+---@param raw_output string|table
+---@return string
+function M.bytes_to_string(raw_output)
+  if type(raw_output) == 'string' then
+    return raw_output
+  end
+  return table.concat(vim.tbl_map(string.char, raw_output))
+end
+
+---@param text string
+---@return AnsiParseResult
+function M.parse_ansi_text(text)
+  local clean_text = text:gsub('\027%[[%d;]*[a-zA-Z]', '')
+  local lines = vim.split(clean_text, '\n', { plain = true, trimempty = false })
+
+  local highlights = {}
+  local line_num = 0
+  local col_pos = 0
+  local current_style = nil
+
+  local i = 1
+  while i <= #text do
+    local ansi_start, ansi_end, code, cmd = text:find('\027%[([%d;]*)([a-zA-Z])', i)
+
+    if ansi_start then
+      if ansi_start > i then
+        local segment = text:sub(i, ansi_start - 1)
+        if current_style then
+          local start_line = line_num
+          local start_col = col_pos
+
+          for char in segment:gmatch('.') do
+            if char == '\n' then
+              if col_pos > start_col then
+                table.insert(highlights, {
+                  line = start_line,
+                  col_start = start_col,
+                  col_end = col_pos,
+                  highlight_group = current_style,
+                })
+              end
+              line_num = line_num + 1
+              start_line = line_num
+              col_pos = 0
+              start_col = 0
+            else
+              col_pos = col_pos + 1
+            end
+          end
+
+          if col_pos > start_col then
+            table.insert(highlights, {
+              line = start_line,
+              col_start = start_col,
+              col_end = col_pos,
+              highlight_group = current_style,
+            })
+          end
+        else
+          for char in segment:gmatch('.') do
+            if char == '\n' then
+              line_num = line_num + 1
+              col_pos = 0
+            else
+              col_pos = col_pos + 1
+            end
+          end
+        end
+      end
+
+      if cmd == 'm' then
+        local logger = require('cp.log')
+        logger.log('Found color code: "' .. code .. '"')
+        current_style = M.ansi_code_to_highlight(code)
+        logger.log('Mapped to highlight: ' .. (current_style or 'nil'))
+      end
+      i = ansi_end + 1
+    else
+      local segment = text:sub(i)
+      if current_style and segment ~= '' then
+        local start_line = line_num
+        local start_col = col_pos
+
+        for char in segment:gmatch('.') do
+          if char == '\n' then
+            if col_pos > start_col then
+              table.insert(highlights, {
+                line = start_line,
+                col_start = start_col,
+                col_end = col_pos,
+                highlight_group = current_style,
+              })
+            end
+            line_num = line_num + 1
+            start_line = line_num
+            col_pos = 0
+            start_col = 0
+          else
+            col_pos = col_pos + 1
+          end
+        end
+
+        if col_pos > start_col then
+          table.insert(highlights, {
+            line = start_line,
+            col_start = start_col,
+            col_end = col_pos,
+            highlight_group = current_style,
+          })
+        end
+      end
+      break
+    end
+  end
+
+  return {
+    lines = lines,
+    highlights = highlights,
+  }
+end
+
+---@param code string
+---@return string?
+function M.ansi_code_to_highlight(code)
+  local color_map = {
+    -- Simple colors
+    ['31'] = 'CpAnsiRed',
+    ['32'] = 'CpAnsiGreen',
+    ['33'] = 'CpAnsiYellow',
+    ['34'] = 'CpAnsiBlue',
+    ['35'] = 'CpAnsiMagenta',
+    ['36'] = 'CpAnsiCyan',
+    ['37'] = 'CpAnsiWhite',
+    ['91'] = 'CpAnsiBrightRed',
+    ['92'] = 'CpAnsiBrightGreen',
+    ['93'] = 'CpAnsiBrightYellow',
+    -- Bold colors (G++ style)
+    ['01;31'] = 'CpAnsiBrightRed', -- bold red
+    ['01;32'] = 'CpAnsiBrightGreen', -- bold green
+    ['01;33'] = 'CpAnsiBrightYellow', -- bold yellow
+    ['01;34'] = 'CpAnsiBrightBlue', -- bold blue
+    ['01;35'] = 'CpAnsiBrightMagenta', -- bold magenta
+    ['01;36'] = 'CpAnsiBrightCyan', -- bold cyan
+    -- Bold/formatting only
+    ['01'] = 'CpAnsiBold', -- bold text
+    ['1'] = 'CpAnsiBold', -- bold text (alternate)
+    -- Reset codes
+    ['0'] = nil,
+    [''] = nil,
+  }
+  return color_map[code]
+end
+
+function M.setup_highlight_groups()
+  local groups = {
+    CpAnsiRed = { fg = vim.g.terminal_color_1 },
+    CpAnsiGreen = { fg = vim.g.terminal_color_2 },
+    CpAnsiYellow = { fg = vim.g.terminal_color_3 },
+    CpAnsiBlue = { fg = vim.g.terminal_color_4 },
+    CpAnsiMagenta = { fg = vim.g.terminal_color_5 },
+    CpAnsiCyan = { fg = vim.g.terminal_color_6 },
+    CpAnsiWhite = { fg = vim.g.terminal_color_7 },
+    CpAnsiBrightRed = { fg = vim.g.terminal_color_9 },
+    CpAnsiBrightGreen = { fg = vim.g.terminal_color_10 },
+    CpAnsiBrightYellow = { fg = vim.g.terminal_color_11 },
+    CpAnsiBrightBlue = { fg = vim.g.terminal_color_12 },
+    CpAnsiBrightMagenta = { fg = vim.g.terminal_color_13 },
+    CpAnsiBrightCyan = { fg = vim.g.terminal_color_14 },
+    CpAnsiBold = { bold = true },
+  }
+
+  for name, opts in pairs(groups) do
+    vim.api.nvim_set_hl(0, name, opts)
+  end
+end
+
+return M
diff --git a/lua/cp/execute.lua b/lua/cp/execute.lua
index 945011f..a098cfe 100644
--- a/lua/cp/execute.lua
+++ b/lua/cp/execute.lua
@@ -86,9 +86,13 @@ function M.compile_generic(language_config, substitutions)
   logger.log(('compiling: %s'):format(table.concat(compile_cmd, ' ')))
 
   local start_time = vim.uv.hrtime()
-  local result = vim.system(compile_cmd, { text = true }):wait()
+  local result = vim.system(compile_cmd, { text = false }):wait()
   local compile_time = (vim.uv.hrtime() - start_time) / 1000000
 
+  local ansi = require('cp.ansi')
+  result.stdout = ansi.bytes_to_string(result.stdout or '')
+  result.stderr = ansi.bytes_to_string(result.stderr or '')
+
   if result.code == 0 then
     logger.log(('compilation successful (%.1fms)'):format(compile_time))
   else
diff --git a/lua/cp/init.lua b/lua/cp/init.lua
index aed8234..a9634ac 100644
--- a/lua/cp/init.lua
+++ b/lua/cp/init.lua
@@ -251,8 +251,25 @@ local function toggle_run_panel(is_debug)
     vim.api.nvim_set_option_value('modifiable', false, { buf = bufnr })
     vim.api.nvim_set_option_value('readonly', was_readonly, { buf = bufnr })
 
+    local ansi = require('cp.ansi')
+    ansi.setup_highlight_groups()
+
     vim.api.nvim_buf_clear_namespace(bufnr, test_list_namespace, 0, -1)
     for _, hl in ipairs(highlights) do
+      local logger = require('cp.log')
+      logger.log(
+        'Applying extmark: buf='
+          .. bufnr
+          .. ' line='
+          .. hl.line
+          .. ' col='
+          .. hl.col_start
+          .. '-'
+          .. hl.col_end
+          .. ' group='
+          .. (hl.highlight_group or 'nil')
+      )
+
       vim.api.nvim_buf_set_extmark(bufnr, test_list_namespace, hl.line, hl.col_start, {
         end_col = hl.col_end,
         hl_group = hl.highlight_group,
@@ -382,6 +399,7 @@ local function toggle_run_panel(is_debug)
 
     local expected_content = current_test.expected or ''
     local actual_content = current_test.actual or '(not run yet)'
+    local actual_highlights = current_test.actual_highlights or {}
     local is_compilation_failure = current_test.error
       and current_test.error:match('Compilation failed')
     local should_show_diff = current_test.status == 'fail'
@@ -424,7 +442,7 @@ local function toggle_run_panel(is_debug)
     else
       if desired_mode == 'single' then
         local lines = vim.split(actual_content, '\n', { plain = true, trimempty = true })
-        update_buffer_content(current_diff_layout.buffers[1], lines, {})
+        update_buffer_content(current_diff_layout.buffers[1], lines, actual_highlights)
       elseif desired_mode == 'git' then
         local diff_backend = require('cp.diff')
         local backend = diff_backend.get_best_backend('git')
@@ -438,13 +456,13 @@ local function toggle_run_panel(is_debug)
           )
         else
           local lines = vim.split(actual_content, '\n', { plain = true, trimempty = true })
-          update_buffer_content(current_diff_layout.buffers[1], lines, {})
+          update_buffer_content(current_diff_layout.buffers[1], lines, actual_highlights)
         end
       else
         local expected_lines = vim.split(expected_content, '\n', { plain = true, trimempty = true })
         local actual_lines = vim.split(actual_content, '\n', { plain = true, trimempty = true })
         update_buffer_content(current_diff_layout.buffers[1], expected_lines, {})
-        update_buffer_content(current_diff_layout.buffers[2], actual_lines, {})
+        update_buffer_content(current_diff_layout.buffers[2], actual_lines, actual_highlights)
 
         if should_show_diff then
           vim.api.nvim_set_option_value('diff', true, { win = current_diff_layout.windows[1] })
@@ -472,6 +490,9 @@ local function toggle_run_panel(is_debug)
 
     local test_render = require('cp.test_render')
     test_render.setup_highlights()
+
+    local ansi = require('cp.ansi')
+    ansi.setup_highlight_groups()
     local test_state = test_module.get_run_panel_state()
     local tab_lines, tab_highlights = test_render.render_test_list(test_state)
     update_buffer_content(test_buffers.tab_buf, tab_lines, tab_highlights)
@@ -596,8 +617,8 @@ local function navigate_problem(delta, language)
   local new_index = current_index + delta
 
   if new_index < 1 or new_index > #problems then
-    local direction = delta > 0 and 'next' or 'previous'
-    logger.log(('no %s problem available'):format(direction), vim.log.levels.INFO)
+    local msg = delta > 0 and 'at last problem' or 'at first problem'
+    logger.log(msg, vim.log.levels.WARN)
     return
   end
 
diff --git a/lua/cp/test.lua b/lua/cp/test.lua
index 753b38b..c217fa0 100644
--- a/lua/cp/test.lua
+++ b/lua/cp/test.lua
@@ -4,6 +4,7 @@
 ---@field expected string
 ---@field status "pending"|"pass"|"fail"|"running"|"timeout"
 ---@field actual string?
+---@field actual_highlights table[]?
 ---@field time_ms number?
 ---@field error string?
 ---@field selected boolean
@@ -216,19 +217,41 @@ local function run_single_test_case(ctx, contest_config, cp_config, test_case)
     .system(run_cmd, {
       stdin = stdin_content,
       timeout = timeout_ms,
-      text = true,
+      text = false,
     })
     :wait()
   local execution_time = (vim.uv.hrtime() - start_time) / 1000000
 
-  local actual_output = (result.stdout or ''):gsub('\n$', '')
-  local stderr_output = (result.stderr or ''):gsub('\n$', '')
+  local ansi = require('cp.ansi')
+  local stdout_str = ansi.bytes_to_string(result.stdout or '')
+  local stderr_str = ansi.bytes_to_string(result.stderr or '')
+
+  local actual_output = stdout_str:gsub('\n$', '')
+  local stderr_output = stderr_str:gsub('\n$', '')
+
+  local actual_highlights = {}
 
   if stderr_output ~= '' then
+    local stderr_parsed = ansi.parse_ansi_text(stderr_output)
+    local clean_stderr = table.concat(stderr_parsed.lines, '\n')
+
+    local line_offset
     if actual_output ~= '' then
-      actual_output = actual_output .. '\n\n--- stderr ---\n' .. stderr_output
+      local stdout_lines = vim.split(actual_output, '\n')
+      line_offset = #stdout_lines + 2 -- +1 for empty line, +1 for "--- stderr ---"
+      actual_output = actual_output .. '\n\n--- stderr ---\n' .. clean_stderr
     else
-      actual_output = '--- stderr ---\n' .. stderr_output
+      line_offset = 1 -- +1 for "--- stderr ---"
+      actual_output = '--- stderr ---\n' .. clean_stderr
+    end
+
+    for _, highlight in ipairs(stderr_parsed.highlights) do
+      table.insert(actual_highlights, {
+        line = highlight.line + line_offset,
+        col_start = highlight.col_start,
+        col_end = highlight.col_end,
+        highlight_group = highlight.highlight_group,
+      })
     end
   end
 
@@ -264,6 +287,7 @@ local function run_single_test_case(ctx, contest_config, cp_config, test_case)
   return {
     status = status,
     actual = actual_output,
+    actual_highlights = actual_highlights,
     error = result.code ~= 0 and result.stderr or nil,
     stderr = result.stderr or '',
     time_ms = execution_time,
@@ -317,6 +341,7 @@ function M.run_test_case(ctx, contest_config, cp_config, index)
 
   test_case.status = result.status
   test_case.actual = result.actual
+  test_case.actual_highlights = result.actual_highlights
   test_case.error = result.error
   test_case.stderr = result.stderr
   test_case.time_ms = result.time_ms
@@ -346,9 +371,44 @@ function M.get_run_panel_state()
 end
 
 function M.handle_compilation_failure(compilation_stderr)
+  local ansi = require('cp.ansi')
+  local logger = require('cp.log')
+  local clean_text = 'Compilation failed'
+  local highlights = {}
+
+  if compilation_stderr and compilation_stderr ~= '' then
+    logger.log('Raw compilation stderr length: ' .. #compilation_stderr)
+    logger.log('Has ANSI codes: ' .. tostring(compilation_stderr:find('\027%[[%d;]*m') ~= nil))
+
+    -- Show first 200 chars to see actual ANSI sequences
+    local sample = compilation_stderr:sub(1, 200):gsub('\027', '\\027')
+    logger.log('Stderr sample: ' .. sample)
+
+    local parsed = ansi.parse_ansi_text(compilation_stderr)
+    clean_text = table.concat(parsed.lines, '\n')
+    highlights = parsed.highlights
+
+    logger.log('Parsed highlights count: ' .. #highlights)
+    for i, hl in ipairs(highlights) do
+      logger.log(
+        'Highlight '
+          .. i
+          .. ': line='
+          .. hl.line
+          .. ' col='
+          .. hl.col_start
+          .. '-'
+          .. hl.col_end
+          .. ' group='
+          .. (hl.highlight_group or 'nil')
+      )
+    end
+  end
+
   for i, test_case in ipairs(run_panel_state.test_cases) do
     test_case.status = 'fail'
-    test_case.actual = compilation_stderr or 'Compilation failed'
+    test_case.actual = clean_text
+    test_case.actual_highlights = highlights
     test_case.error = 'Compilation failed'
     test_case.stderr = ''
     test_case.time_ms = 0
diff --git a/spec/ansi_spec.lua b/spec/ansi_spec.lua
new file mode 100644
index 0000000..09c7304
--- /dev/null
+++ b/spec/ansi_spec.lua
@@ -0,0 +1,107 @@
+describe('ansi parser', function()
+  local ansi = require('cp.ansi')
+
+  describe('bytes_to_string', function()
+    it('returns string as-is', function()
+      local input = 'hello world'
+      assert.equals('hello world', ansi.bytes_to_string(input))
+    end)
+
+    it('converts byte array to string', function()
+      local input = { 104, 101, 108, 108, 111 }
+      assert.equals('hello', ansi.bytes_to_string(input))
+    end)
+  end)
+
+  describe('parse_ansi_text', function()
+    it('strips ansi codes from simple text', function()
+      local input = 'Hello \027[31mworld\027[0m!'
+      local result = ansi.parse_ansi_text(input)
+
+      assert.equals('Hello world!', table.concat(result.lines, '\n'))
+    end)
+
+    it('handles text without ansi codes', function()
+      local input = 'Plain text'
+      local result = ansi.parse_ansi_text(input)
+
+      assert.equals('Plain text', table.concat(result.lines, '\n'))
+      assert.equals(0, #result.highlights)
+    end)
+
+    it('creates correct highlight for colored text', function()
+      local input = 'Hello \027[31mworld\027[0m!'
+      local result = ansi.parse_ansi_text(input)
+
+      assert.equals(1, #result.highlights)
+      local highlight = result.highlights[1]
+      assert.equals(0, highlight.line)
+      assert.equals(6, highlight.col_start)
+      assert.equals(11, highlight.col_end)
+      assert.equals('CpAnsiRed', highlight.highlight_group)
+    end)
+
+    it('handles multiple colors on same line', function()
+      local input = '\027[31mred\027[0m and \027[32mgreen\027[0m'
+      local result = ansi.parse_ansi_text(input)
+
+      assert.equals('red and green', table.concat(result.lines, '\n'))
+      assert.equals(2, #result.highlights)
+
+      local red_highlight = result.highlights[1]
+      assert.equals(0, red_highlight.col_start)
+      assert.equals(3, red_highlight.col_end)
+      assert.equals('CpAnsiRed', red_highlight.highlight_group)
+
+      local green_highlight = result.highlights[2]
+      assert.equals(8, green_highlight.col_start)
+      assert.equals(13, green_highlight.col_end)
+      assert.equals('CpAnsiGreen', green_highlight.highlight_group)
+    end)
+
+    it('handles multiline colored text', function()
+      local input = '\027[31mline1\nline2\027[0m'
+      local result = ansi.parse_ansi_text(input)
+
+      assert.equals('line1\nline2', table.concat(result.lines, '\n'))
+      assert.equals(2, #result.highlights)
+
+      local line1_highlight = result.highlights[1]
+      assert.equals(0, line1_highlight.line)
+      assert.equals(0, line1_highlight.col_start)
+      assert.equals(5, line1_highlight.col_end)
+
+      local line2_highlight = result.highlights[2]
+      assert.equals(1, line2_highlight.line)
+      assert.equals(0, line2_highlight.col_start)
+      assert.equals(5, line2_highlight.col_end)
+    end)
+
+    it('handles compiler-like output', function()
+      local input =
+        "error.cpp:10:5: \027[1m\027[31merror:\027[0m\027[1m 'undefined' was not declared\027[0m"
+      local result = ansi.parse_ansi_text(input)
+
+      local clean_text = table.concat(result.lines, '\n')
+      assert.is_true(clean_text:find("error.cpp:10:5: error: 'undefined' was not declared") ~= nil)
+      assert.is_false(clean_text:find('\027') ~= nil)
+    end)
+  end)
+
+  describe('ansi_code_to_highlight', function()
+    it('maps standard colors', function()
+      assert.equals('CpAnsiRed', ansi.ansi_code_to_highlight('31'))
+      assert.equals('CpAnsiGreen', ansi.ansi_code_to_highlight('32'))
+      assert.equals('CpAnsiYellow', ansi.ansi_code_to_highlight('33'))
+    end)
+
+    it('handles reset codes', function()
+      assert.is_nil(ansi.ansi_code_to_highlight('0'))
+      assert.is_nil(ansi.ansi_code_to_highlight(''))
+    end)
+
+    it('handles unknown codes', function()
+      assert.is_nil(ansi.ansi_code_to_highlight('99'))
+    end)
+  end)
+end)