FILE PHOTO: The headquarters of Synopsys Inc., in Sunnyvale, California, U.S., October 23, 2024. REUTERS/Stephen Nellis/File Photo

(Reuters) - Shares of Synopsys fell nearly 35% on Wednesday, putting the chip design software provider on track to erase this year's gains, as Sino-U.S. trade tensions hurt quarterly revenue and left investors mulling the future of its China business.

Successive U.S. administrations have attempted to restrict Beijing's access to American chip technology, limiting U.S. firms' reach into a key semiconductor market. This has hurt Synopsys, which provides software for designing complex processors.

The company, poised for its largest single-day drop in share price on record, reported revenue of $1.74 billion for the third quarter ended July 31 on Tuesday, missing analysts' estimates according to LSEG data.

It recorded weakness in its IP business in the quarter, which CEO Sassine Ghazi attributed to export restrictions disrupting business in China and challenges at a major foundry customer.

Synopsys faced over a month of U.S. export curbs on chip design software to China, essentially cutting off the market that brings over 10% of revenue for major industry players.

Though the restrictions placed in late May were ultimately lifted in July, "Chinese customer confidence has been shaken and spending appetite has waned considerably," Piper Sandler analysts said.

Shares of peer Cadence Design Systems fell nearly 7%.

While Ghazi did not name the foundry customer, Intel, a long-standing Synopsys patron, has significantly pared back its chip manufacturing ambitions and slowed down or canceled various foundry projects.

Synopsys had likely focused a lot of IP resources on Intel's "18A" technology, J.P. Morgan analysts said.

Intel CEO Lip-Bu Tan has scaled back 18A plans, originally positioned for external customers, saying it could generate a reasonable return only if used for Intel's own products.

Synopsys is also conducting a strategic review of its business after closing its drawn-out $35 billion buyout of engineering design software firm Ansys in July.

The company will cut its workforce by 10% by the end of fiscal year 2026, CEO Ghazi said.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Vijay Kishore)