He might be really hurt. Naruto has always been an outcast and being called a demon again could reopen old wounds. So he could just stand there in shock and disbelief, his eyes wide with pain.
It might also cause Naruto to lose control more easily. If he hears such a hurtful term from someone he cares about like Sakura, it could make him more vulnerable to the Nine - Tails' influence. In the long run, it could be a turning point in his character development, either making him more bitter or more determined to show everyone, including Sakura, that he's not what she says.
One possible reason could be that Naruto has some sort of new power that seems menacing or uncontrollable to Sakura at that moment. Maybe it's a power he got unexpectedly and it has some sort of dark or wild aspect to it that makes her blurt out 'demon'.
He could also get angry. After all, being misjudged like that is unfair. His anger could lead him to either lash out verbally at Sakura or he could leave the village in a fit of rage, feeling that he is not accepted even by his friends. This could then lead to a series of events where Naruto has to find his own way and Sakura realizes her mistake later on.
Well, it could be that in this fanfiction, Naruto has some sort of hidden agenda. He might call Sakura ugly as a form of reverse psychology. He could be thinking that by doing so, she'll prove him wrong and become more confident. Or perhaps there's some miscommunication or misunderstanding between them. For example, Naruto misheard someone talking about Sakura in a negative way regarding her looks and he wrongly believes it, so he says she's ugly.
Well, without actually reading it, it could be a fan - made story where Naruto in some sort of 'demon' form has an interaction or relationship with Sakura in a plot that might have elements related to 'lemon' which could imply some sort of sweet or refreshing aspect to their relationship in the story. It could be about their adventures together or how they face challenges while being in this unique relationship setup.
One possible reason could be Naruto's out - of - control power. If in the fanfiction Naruto has some new and extremely powerful abilities that he can't fully manage, Sakura might see him as a monster out of fear. For example, if he accidentally causes destruction while trying to save the village.
There are several places to search for it. Firstly, check out some Naruto - focused fan communities. They often share and discuss different fanfics, and someone might be able to point you in the right direction. Also, as I mentioned before, big fanfic platforms like FanFiction.net and Archive of Our Own are good starting points. Just use their search functions and type in relevant keywords from the title.
In many Sakura Naruto fanfics, Sakura is often depicted as a strong - willed character. She uses her medical skills not only for healing but also for strategic purposes during battles.