Shares of Oracle (ORCL) plunged in premarket trading Monday after the enterprise software maker projected current-quarter revenue below Wall Street targets and narrowly missed expectations for the first quarter as a tough economy pressured cloud spending by businesses. CEO Safra Catz reassured investors that the company has been seeing more robust growth in its cloud services business and that the slowdown in the overall economy should not impact demand for the software it sells to corporate clients.

During the first three months of the fiscal year, Oracle’s cloud services and license support business saw revenue increase by 6% to $7.4 billion, while its hardware and software business saw revenues slide by 8% to $809 million. According to FactSet, the results came in below the average analyst estimate of $9.55 billion.

That’s because the quarter saw a pullback in corporate spending, led by the need to reduce IT expenses and the decision to delay some planned investments. Businesses are now rethinking their digitization plans, which hurts Oracle as it plays catch-up in a segment dominated by larger rivals such as Amazon Web Services and Microsoft.

The pullback in cloud spending also led to a sharp drop in sales of Oracle’s on-premises software and applications, which compete with rivals such as SAP, Siebel Systems, and PeopleSoft by selling e-business suites that include accounting and human resource applications, customer relationship management tools and supply chain management programs. Software sales fell 9% to $3.6 billion, well below the average analysts’ estimate of $4.04 billion.

However, the company’s newest products and partnerships boost its growth prospects. For example, it recently announced a partnership with Cohere, a tech startup that helps companies build generative AI applications in which machines learn and adapt independently. The company expects the partnership to result in a “significant” new revenue stream for Oracle.

Oracle’s cloud infrastructure sales jumped 66% during the first quarter to $4.6 billion, much faster than its hyperscale rivals. That unit accounts for 77% of Oracle’s cloud services and license support revenues.

The company said its cloud infrastructure unit is now generating free cash flow, which was $5.7 billion in the first quarter and up 21% year-over-year. But Oracle’s guidance for the second quarter, which was given on a call with investors on Monday evening, was more cautious than some had expected. The company expects to grow its mainline cloud services and license support revenue by 8% to 10%, down from previous comments that the figure would accelerate this year. That guidance, including the contribution of Oracle’s recently acquired healthcare IT provider Cerner, still looks solid. Still, it may have some near-term volatility compared with management’s past statements on revenue acceleration.