Synopsys Inc. (NASDAQ:SNPS) witnessed a drastic 21% plunge in premarket trading after announcing fiscal third-quarter results that failed to meet market expectations, compounded by poor future guidance caused by U.S. restrictions on chip sales to China.

In the quarter ending July 31, the company reported adjusted earnings of $3.39 per share on total revenue of $1.74 billion, missing analysts’ forecasts of $3.80 and $1.77 billion, respectively.

While Synopsys experienced a year-over-year 23% increase in design automation revenue—partly thanks to a $77 million contribution from Ansys—its IP revenue saw an 8% decline due to various challenges, including export restrictions and reduced customer fees.

Management anticipates these difficulties could continue in the near future. New sales restrictions affecting China were imposed in late May but remained in place only until early July.

For Q4, Synopsys forecasts adjusted earnings ranging from $2.76 to $2.80 per share, alongside revenue predictions between $2.23 billion and $2.26 billion—both substantially lower than market expectations of $4.14 and $2.59 billion. Furthermore, fiscal 2025 EPS is expected to range between $12.76 and $12.80 against initial forecasts of $14.58, with revenue approximated between $7.03 billion and $7.06 billion, below predictions of $7.45 billion.