Netflix released its first quarter earnings report after closing bell tonight, posting earnings of 40 cents per share on $2.64 billion in revenue. Analysts had been expecting earnings of 37 cents per share on $2.64 billion in revenue. In last year’s first quarter, the video streaming firm reported earnings of 6 cents per share on $1.96 billion in revenue.

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NFLX Photo by Matt Perreault

Netflix misses on subscriber adds

Domestic streaming revenue amounted to $1.47 billion, while international streaming revenue was $1.046 billion. Wall Street was predicting $1.48 billion in domestic streaming revenue and $1.05 billion in international streaming revenue. Netflix added 5 million new subscribers during the first quarter, compared to the consensus of around 5.3 million adds. In the same quarter a year ago, the company added 6.7 million subscribers. It now has nearly 99 million subscribers.

For the second quarter, Netflix expects $2.64 billion in streaming revenue and looks to add 600,000 U.S. subscribers and 2.6 million international subscribers.

Netflix still saw strong traffic

Before tonight’s earnings report, Verto Analytics reported a jump in traffic to Netflix due to Iron Fist. The firm said the company had almost quadruple the number of monthly U.S. users that other video streaming services had in March. Additionally, Verto found that Netflix users spend a lot more time using it than users of other streaming services do (212 minutes per user each month, versus 30 minutes for Amazon)

“As streaming companies and legacy content studios continue to battle for audience attention, it will be important for Netflix to continue making investments in content to remain the leader in the market,” said Verto Analytics Founder and CEO Hannu Verkasalo in an email. “Netflix original TV series and movies are already being recognized by prominent entertainment organizations like the Oscars and the Cannes Film Festival. It will be interesting to see how the company continues to evolve their offerings.”

Short-sellers rejoice in the disappointment

Short interest in Netflix stock has grown 23% year to date, reaching $3.6 billion, according from data from financial analytics firm S3 Partners. The firm’s research head, Ihor Dusaniwsky, said in an email that short interest has been holding fairly stable since the end of January, riding between $3.3 billion and $3.7 billion.

Short-sellers were down 63% in 2015, he explained before tonight’s earnings report, and as a result, short conviction in the stock waned in early 2016. He reported that as Netflix stock rallied in the second half of last year, short-sellers didn’t boost their positions in step with the rally, demonstrating a continuing decline in short conviction. He added that short-sellers began covering their positions late last year.

Before tonight’s report, Dusaniwsky described short-sellers as “already jumpy” and predicted that a continued rally could cause them to cover faster than they usually would. He also predicted that in the event of a positive earnings report, short interest might fall to $3.1 billion or so, which he observed last summer. That would mean more than $500 million of covering in a very short period of time.

However, given how fast Netflix stock is falling, short-sellers are probably rejoicing. The shares plunged by more than 3% in extended trading after closing Monday’s regular hours up 3%.