Oracle projected current-quarter revenue below Wall Street targets on Monday and narrowly missed expectations for the first quarter as a tough economy pressured cloud spending by businesses, sending its shares down 9% in extended trading.

After a surge in cloud demand during the pandemic, businesses are rethinking their digitisation plans, hurting Oracle as it plays catch-up in a segment dominated by larger rivals such as Amazon Web Services and Microsoft.

Still, analysts have said that the rise in adoption of artificial intelligence applications could boost Oracle’s cloud infrastructure business because the advances made in its networking technology are more suited to take on AI workloads.

“As of today, AI development companies have signed contracts to purchase more than US$4-billion of capacity in Oracle’s Gen2 Cloud. That’s twice as much as we had booked at the end of Q4,” chairman and chief technology officer Larry Ellison said.

Ellison, a self-described close friend of Elon Musk, announced that the Tesla CEO’s AI start-up xAI had signed a contract to train AI models in Oracle’s Gen2 Cloud.

He also said all nine utility companies owned by Berkshire Hathaway will replace their existing ERP systems with the company’s Fusion Cloud applications.

Shares of Oracle have gained about 55% so far this year.

Below estimates

The firm forecast second-quarter revenue growth of between 5% and 7%, lower than analysts’ average estimate of 8.2%, according to LSEG data. It also expects adjusted profit between $1.30 and $1.34/share, compared with expectations of $1.33.

Revenue for the first quarter stood at $12.45-billion, slightly below estimates of $12.47-billion.