Netflix Inc. (NFLX) bears are getting slaughtered.

The world’s largest paid online TV network’s shares surged 12% in extended trading after it reported adding 7 million new customers in the third quarter, beating analyst forecasts and its own estimates by about 2 million. Investors betting against the stock hoped third-quarter results would vindicate their short-selling strategies. Instead, they found themselves picking up an even larger bill.

Ihor Dusaniwsky, managing director at financial analytics firm S3 Partners, said in a tweet that the positive reaction to Netflix’s latest update cost company bears $687 million. He added that the stock’s 80% rally this year has brought year-to-date mark-to-market losses to $3.63 billion for short sellers. 

$NFLX up over 12% in after market trading, shorts are down $687 million in after-market mark-to-market losses bringing year-to-date mark-to-market losses to $3.63 billion. pic.twitter.com/nNsh6cLM9B
— Ihor Dusaniwsky (@ihors3) October 16, 2018

Investments Paying Off

Netflix’s encouraging third-quarter figures are helping to restore faith in the company. Last quarter, the streaming giant found itself on the wrong side of market sentiment after gaining about 1 million fewer customers than it expected.

The company attributed its turnaround to original content investments paying off and international gains. Nearly 6 million of new subscribers in the third quarter quarter came from overseas, a result that outstripped both Netflix and analyst’s initial forecasts.

Netflix’s international success comes off the back of an aggressive push to increase the number of its foreign language productions. The company has also been splashing cash on increasing original content in English-speaking markets in order to better compete with a growing number of competitors, including Walt Disney Co. (DIS), Amazon.com Inc. (AMZN) and Google parent Alphabet Inc. (GOOGL).

Those costly endeavors have caught the attention of Wall Street. Last year, Netflix said it expected to spend about $8 billion on programming in 2018. Several analysts believe the company is likely to splurge even more, describing Netflix’s spending as unsustainable and likely to put too big a strain on its balance sheet

Netflix expects negative free cash flow to come in at $3 billion this year and the next. "We recognize we are making huge cash investments in content, and we want to assure our investors that we have the same high confidence in the underlying economics as our cash investments in the past," the company wrote in a letter to shareholders Tuesday.