ServiceNow NOW and Atlassian TEAM is two of the premier enterprise cloud software companies, helping large enterprises modernize operations, automate workflows, and manage critical business processes.
While both benefit from long-term digital transformation trends, their business dynamics and implementation profiles differ significantly. For investors looking to choose between these two software leaders, a closer look at their fundamentals, growth prospects and risks will help determine which stock currently offers a better investment case.
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The argument for ServiceNow Stock
ServiceNow benefits from the increasing acceptance of its workflows by companies undergoing digital transformation. The company expects to reach $1.5 billion in AI revenue in 2026 as ServiceNow’s AI products such as Now Assist become more popular across its customer base and customers adopt AI faster and at a much greater scale.
The number of offerings that included three or more Now Assist products increased nearly 70% year-over-year in the first quarter, indicating that customers are expanding AI usage across multiple workflows rather than testing a single AI feature. This bodes well for ServiceNow’s prospects as customers increasingly move from AI pilots to full production implementations in their organizations and are now investing in AI across multiple business functions.
Now Assist also supports ServiceNow in expanding other AI products. The company said the launch of Now Assist increases demand for AI Control Tower and RaptorDB Pro. In the first quarter, AI Control Tower’s average deal size more than doubled sequentially, while RaptorDB Pro’s deal volume increased 80% year over year. Increasing customer adoption and higher AI revenue expectations make Now Assist a key driver of ServiceNow’s AI growth strategy.
However, ServiceNow is integrating multiple acquisitions at once, including Moveworks, Armis, Veza and Pyramid Analytics. Due to the successive acquisitions, ServiceNow must integrate the acquired products, people, technologies and sales teams into its existing business. This results in higher costs for the company. These costs are expected to impact the Company’s profitability before the benefits of synergies from acquisitions are fully realized.
For example, the Armis acquisition is also expected to put pressure on profitability in 2026. Management expects Armis to reduce subscription gross margin by 25 basis points, operating margin by 75 basis points and free cash flow margin by 200 basis points in 2026. For the second quarter of 2026, Armis is expected to reduce its operating margin by 125 basis points. If customer adoption is slower than expected, these companies may take longer to contribute to revenue.
The story continues
The case for Atlassian Stock
Atlassian’s cloud business remained a key growth driver in the third quarter of fiscal 2026. Cloud revenue rose 29% year-over-year to more than $1.1 billion, helping total revenue rise 32% to $1.8 billion. The strong performance was driven by higher customer adoption, cross-selling and continued demand for the company’s cloud-based products.
AI plays an important role in this growth. Management said customers who use the Rovo AI product grow their annual recurring revenue (ARR) about twice as fast as customers who don’t use Rovo. Rovo’s credit usage is growing by more than 20% month over month, while millions of users are actively using the platform. In addition, more and more customers are using the Teamwork Collection, which combines Jira, Confluence, Loom and Rovo in one offer. This package helps Atlassian sell more products to existing customers and increase cloud spending.
The company’s cloud business benefits from continued enterprise adoption. Management said cloud migrations from the data center remain on track and should contribute to mid- to high-single-digit cloud growth over time. TEAM’s seat expansion remains healthy, while net revenue retention remained above 120% in the third quarter as customers continue to launch more products and increase their spending on the Atlassian platform.
The above factors show that Atlassian’s cloud business appears to be well positioned for further growth. The increasing adoption of AI, higher cross-selling through Teamwork Collection and ongoing cloud migrations are helping the company expand its customer relationships. If these trends continue, the cloud business is likely to remain Atlassian’s largest growth driver in the coming quarters.
How do NOW and TEAM earnings estimates compare?
The Zacks Consensus Estimate for NOW’s 2026 earnings per share (EPS) is $4.13, unchanged over the past 30 days, representing year-over-year growth of 17.7%.
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The Zacks Consensus Estimate for TEAM’s fiscal 2026 earnings per share (EPS) is $5.48, unchanged over the past 30 days, representing year-over-year growth of 48.9%.
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NOW vs. TEAM: price development and valuation
Year to date, shares of NOW and TEAM are down 29.7% and 45.2%, respectively.
NOW Vs. TEAM: YTD price return performance
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Currently, TEAM is trading at a forward sales multiple of 3.06X, which is lower than NOW’s forward sales multiple of 6.26X. TEAM’s reasonable valuation makes it more attractive to investors seeking value and stability.
NOW vs. TEAM: Forward 12-month P/S ratio
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Conclusion: TEAM is NOW ahead
Both ServiceNow and Atlassian are well-positioned to benefit from the AI wave. However, ServiceNow faces near-term risks, such as dilutive impact on margins from its successive acquisitions, which could harm the company’s prospects in the near term.
In contrast, Atlassian is showing more robust execution, with the company seeing strong momentum in its cloud business driven by strong adoption of its AI products. TEAM’s reasonable valuation also provides some protection against downside risks, giving TEAM a clear advantage over NOW.
Currently, NOW and TEAM each have a Zacks Rank #3 (Hold). You can see You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article was originally published on Zacks Investment Research (zacks.com).
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https://finance.yahoo.com/technology/articles/servicenow-vs-atlassian-cloud-software-142400234.html
