It is an upgrade from f34 to f35, using the default theme, I created a new user, and the same thing happens, I deleted nautilus cache and there was no change.
This also doesn’t help in my case.
I have not been able to reproduce the problem in my other fedora 35 installations yet.
There the menu just fis and is not cut-off.
What theme are you using? My compressed folders look like folders with a zipper on them, using Wayland and default Gnome filemanager (Nautilis). Looks like the following …
The only thing non-standard is the f34 background, that I like and reinstalled by the command dnf install f34-backgrounds-base, because dnf autoremove removed it in advance.