Is Workday Inc (WDAY) a Buy or Sell Based on Short Interest and Market Sentiment?

The debate over Workday Inc (WDAY) as a contrarian investment hinges on two critical factors: its elevated short interest and divergent market sentiment. While short sellers have aggressively positioned against the stock in recent months, WDAY's robust financial performance and strategic AI-driven innovations suggest a compelling case for a short squeeze and long-term value. This analysis synthesizes short interest metrics, Q3 2025 earnings results, and analyst sentiment to evaluate whether WDAY is a buy or sell in a contrarian framework.

Short Interest: A Double-Edged Sword

As of November 14, 2025, , . This marks a significant increase from July 31, 2025, 3.0. A rising SIR indicates growing bearish sentiment, but it also heightens the risk of a short squeeze-a scenario where short sellers are forced to buy shares to cover losses, potentially driving the stock price upward. For context, a SIR above 5 is often viewed as a warning sign of excessive pessimism.

The recent surge in short interest contrasts with WDAY's fundamentals. Despite the bearish positioning, the stock's short percentage of float (4.71%) exceeds the industry average, underscoring its status as a short-targeted stock. Institutional investors, including Hudson Bay Capital Management and JPMorgan Chase, have also reported short positions, amplifying the potential for coordinated shorting activity. However, this concentration of short sellers could backfire if WDAY's stock experiences a sharp rally, triggering a self-reinforcing upward spiral.

Q3 2025 Earnings: A Foundation for Optimism

Workday's Q3 2025 results provide a counterpoint to the bearish narrative. The company reported total revenue of $2.432 billion, , a $2.244 billion figure. Non-GAAP operating income reached 28.5% of revenue, outpacing the prior-year 26.3% margin. These figures highlight Workday's operational efficiency and pricing power, particularly in its core enterprise software markets.

The company's strategic investments in AI further strengthen its long-term outlook. At Workday Rising 2025, the firm unveiled AI agents like ™ and expanded partnerships with Microsoft, while acquiring AI-focused companies like Paradox and Sana. These moves position Workday to capitalize on the enterprise AI boom, a sector projected to grow at a double-digit CAGR through 2030. Additionally, international revenue rose 13% to $607 million, reflecting the company's global expansion.

Analyst Sentiment: Cautious Optimism and Contrarian Opportunities

Analyst sentiment toward WDAY is mixed, with bullish and bearish views reflecting broader debates about AI's impact on enterprise software. DA Davidson maintains a Neutral rating with a $250 price target, citing strong AI momentum but cautioning about valuation pressures. Conversely, RBC Capital and Guggenheim remain optimistic, emphasizing Workday's long-term growth potential. The consensus forward P/E of 32.1 is elevated compared to peers, but this premium is justified by the company's recurring revenue model and AI differentiation.

The recent 5% post-earnings decline in WDAY's stock, driven by concerns over margin compression, presents a contrarian buying opportunity. Short sellers, who have increased their bets amid this volatility, may inadvertently fuel a short squeeze if the stock rebounds. This dynamic is amplified by Workday's strong customer retention and expanding partner ecosystem, which provide a durable revenue base.

Conclusion: A Buy for Contrarian Investors

While WDAY's short interest and mixed analyst sentiment warrant caution, the company's financial performance and AI-driven innovation create a compelling case for a contrarian buy. The elevated short interest ratio (4.91) and institutional short positions suggest a high probability of a short squeeze if the stock breaks above key resistance levels. Furthermore, Workday's Q3 results demonstrate its ability to scale revenue and margins in a competitive market, countering bearish narratives about growth sustainability.

For investors willing to navigate short-term volatility, WDAY offers a unique combination of fundamental strength and short-term catalysts. However, prudence is advised, as the stock's elevated valuation and margin pressures could test patience in a prolonged market correction.