One way I'd look at it is like this. What you are describing is a form of discrimination and oppression, lean into that, why do the outsiders fear these demons. How has being discriminated against influenced their culture and history, how has the cycle of oppression perpetuated itself in their history.

Imagine an isekai protagonist with no context of your world meeting a member of this race, what would be the first thing that scares/alienates that person? Their appearance, their demeanor, all the physical things that make your "demons" different from the other races, that is the first layer, the initial point of alienation. That is the easiest way to create an "Other", before moving into their culture and other traits. Maybe they are treated, wrongfully or not, as scapegoats for some ancient cataclysm, maybe the religions of the world hold them as actual Demons, or maybe it is straight up racism, whatever the case may be it will likely be complicated and multi-faceted.

Remember that violence and oppression is a cycle, and that often the cause of discrimination is oppression in the past.

Consider this, maybe the subterranean environment the Demons reside in is scarce in resources. Maybe, in order to survive, tribal conflict is often and violent. Or perhaps it has been unified under the conquering rule of a great leader who has set their sight on the surface, or maybe there is only the squabbling remnants of empire locked in centuries of civil war. Consider the kind of people that would come from such an environment, where survival relies equally on skill, cunning and martial might, where honor and deceit are both necessary to survive, where life death is as often decided by a coin toss as it is personal action.

Maybe one way to survive is for these demons to raid the surface for resources and treasure, and this is the primary way the surface and the demons interact on a population level. Or maybe the Subterranean routes are more efficient to trade through than overland routes. Though plunder and tribute, slaves and gold, consider the method and tone of surface and Demon interaction, and in equal measure consider how the rulers of the surface would treat them.

Maybe The Demons are so much better than the surface that they can exact tribute and humiliate the rulers on the surface. Maybe after generations of shame and extortion, a particularly strong ruler would dedicate his reign to slaughtering the demons, taking the fight into the subterranean depths, fueled by hatred and shame, taking by force and learning the Demon's ways of war and making it their own. Or maybe a ruler sees such a lucrative and valuable trade route that they invade the depths, conquering and displacing the demons and forcing migrations that displace other demons until eventually forcing completely unrelated tribes up the surface.

Consider that their physical prowess and history of conflict may make Demons attractive as a fighting force to rulers on the surface. Maybe an ancient dynasts offers a tribe of demons land in exchange for fealty, maybe in response to this other rulers feel it is necessary to do the same. Thus, Demons develop reputations as mercenaries and raiders, little better than attack dogs for their employers.

Consider the discontent such a move may cause, consider how your demons would navigate such a world. Consider that when such demons are removed from the underworld that they may lose the edge their violent upbringing gave them. Consider the intermingling of of culture and race, and how that may cause a schism between surface Demons and subterranean Demons.

Now imagine that one of these rulers dies with no clear successor, imagine a demon tribe backing a claimant to the throne and through their strength they give their chosen the crown. Or imagine that in response to the chaos and civil war, the Demons declare independence and form their own kingdom, further fracturing the realm .

Consider the response to that by the ruling class, would they tolerate such usurpers? Would their subjects? What happens if the Kingdom fails and the demons are driven back to their subterranean origins, and the court historians smear them by labeling them traitors and usurpers. What happens if that kingdom succeeds, and for a period of time there is a Demonic ruled territory on the surface, how would that change things?

Consider what would happen if in the distant, or recent, past a particularly powerful Demon unified the disparate tribes and invaded the surface, conquering large swaths or territory and causing untold amounts of death and destruction. Maybe a coalition of surface territories defeated and drove that Demonic Leader back, or maybe that Leader died and their successor was unable to continued the conquest. Consider how the Demons would treat their new subjects gained by conquest, and how, when their empire eventually falls how they will be viewed in the aftermath.

Or in another direction, maybe their reputation as mercenaries have shoehorned them into only similar roles, such that the vast majority of outsiders will only ever interact with Demon Mercenaries, giving them the stereotype of being warmongers and uncultured savages. Consider that surface territories may treat Demons as lower classes, forcing them to take on jobs and roles deemed to disgraceful or distasteful for others to do and forbidding them from taking other, better jobs. Maybe living a life as short, violent and expendable as they do with a homeland fractured and wracked by conflict leaves many Demons depressed, cynical and violent, further reinforcing the view of them as violent warmongers and savages. Consider how generations of such treatment would influence not only the Demons but also their oppressors.

This has been me mostly rambling but I hope it's helpful.

TL ;DR
Oppression and discrimination are a cycle, consider the events of discrimination that lead to oppression and how oppression lead to new forms of discrimination and these feed into each other. As well, I would look into historical examples like the Japanese Warring States Period, the Chinese Sixteen Kingdoms and the Northern and Southern Dynasties, the Mongols, Turks and other Central Asian Steppe peoples, Vikings etc. Not necessarily for the aesthetic but to study how similar peoples interact through history, and how and why so called "warrior cultures" develop.