(Reuters) -Synopsys ( SNPS ) forecast third-quarter revenue largely above Wall Street estimates on Wednesday, driven by strong demand for its semiconductor design software as companies ramp up spending on AI chips.

Shares of the company rose 3.8% in extended trading, after falling about 10% during the session following a media report that said the Trump administration had ordered U.S. chip design software firms to cease sales to Chinese groups.

Synopsys ( SNPS ) CEO Sassine Ghazi said on a post-earnings call that the company had not received a letter from the U.S. Department of Commerce's Bureau of Industry and Security (BIS), which enforces export controls.

"We are aware of the reporting and speculations, but Synopsys ( SNPS ) has not received a notice from BIS. So our guidance reflects our current understanding of BIS export restrictions as well as our expectations for year-over-year decline in China," Ghazi said.

While the company has been seeing a slowdown in China, which typically accounts for about 16% of its annual revenue, robust demand from other regions, including Europe and South Korea, helped offset the weakness.

It reported revenue of $1.60 billion in the second quarter ended April 30, in line with estimates.

The company projected current-quarter revenue between $1.76 billion and $1.79 billion, while analysts on average expect $1.76 billion, according to data compiled by LSEG.

In a further escalation of regulatory pressure on Synopsys ( SNPS ), the U.S. Federal Trade Commission said on Wednesday that it would require Synopsys ( SNPS ) and software firm Ansys to divest certain assets to address antitrust concerns surrounding their $35 billion merger.

However, during the earnings call earlier, Ghazi said that the company has regulatory clearances for its proposed merger with Ansys in all jurisdictions except China.

"We are working cooperatively and actively negotiating ... to secure China regulatory clearance and we continue to anticipate closing in the first half of this year," Ghazi said.

Synopsys ( SNPS ), which counts companies such as Nvidia, Intel and Qualcomm among its partners, provides the software and hardware used to design advanced processors.