Oracle's stock experienced a decline of over 8% in pre-market trading on Tuesday, following the software company's second-quarter revenue growth that fell short of Wall Street's expectations, primarily due to intense competition in the database and cloud services sectors.

On Monday, Oracle announced a second-quarter revenue of $14.06 billion, reflecting a 9% increase year-over-year, yet it was below the anticipated $14.11 billion as per LSEG estimates.

The company reported adjusted earnings of $1.47 per share, slightly missing the forecasted profit of $1.48 per share. For the third quarter, Oracle projected adjusted earnings per share to be between $1.50 and $1.54, while analysts had expected $1.57.

Despite robust growth in its cloud division, Oracle faces stiff competition from major players like Microsoft (MSFT) and Amazon (AMZN), which have a significant foothold in the market.

Investor expectations for AI-related companies have been notably high, as many anticipate that this technology will drive substantial growth in the future. Oracle's shares have surged over 80% this year.

"Oracle has a longstanding reputation for exceeding estimates, so even a minor shortfall can unsettle investors," remarked Rebecca Wettemann, CEO of Valoir, an industry analysis firm, noting that the expectations surrounding AI companies may be "overheated."

To enhance its market position amid fierce competition, Oracle has formed partnerships with leading cloud providers by integrating its database technology into Microsoft's Azure and Amazon's cloud services, enabling customers to seamlessly connect data across different applications.

Safra Catz, Oracle's CEO, stated that the company's total cloud revenue is expected to exceed $25 billion by fiscal 2025 and emphasized that annual capital expenditures would be double that of the current fiscal year.

"Although the Cloud segment remains robust, it necessitates a significant increase in capital expenditures, which is exerting pressure on margins. We anticipate that Oracle will continue to be a distant fourth among hyperscalers despite these investments," commented DA Davidson analyst Gil Luria.

The company has invested billions in enhancing its cloud infrastructure by acquiring hardware from chip manufacturer Nvidia (NVDA) and establishing cloud facilities to bridge the gap with industry leaders.