We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
ServiceNow vs. Atlassian: Which Cloud Software Stock Has an Edge?
Read MoreHide Full Article
Key Takeaways
Atlassian is seeing strong cloud growth driven by AI adoption, cross-selling and customer expansion.
TEAM trades at a lower forward sales multiple than ServiceNow, offering a more attractive valuation.
ServiceNow is benefiting from AI adoption but faces margin pressure from multiple acquisitions.
ServiceNow (NOW - Free Report) and Atlassian (TEAM - Free Report) are two of the most important enterprise cloud software companies, helping large organizations modernize operations, automate workflows and manage critical business processes.
While both benefit from long-term digital transformation trends, their business momentum and execution profiles differ meaningfully. For investors trying to choose between these two software leaders, a closer look at their fundamentals, growth outlook and risks helps determine which stock currently offers a stronger investment case.
The Case for ServiceNow Stock
ServiceNow has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. The company expects to achieve $1.5 billion in AI revenues in 2026 on the back of rising adoption of ServiceNow's AI products, such as Now Assist, across its customer base, where customers are deploying AI faster and on a much larger scale.
Deals including three or more Now Assist products grew nearly 70% year over year in the first quarter, suggesting 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 are increasingly moving from AI pilots to full production deployments across their organizations and are now investing in AI across multiple business functions.
Now Assist is also helping ServiceNow grow other AI products. The company stated that the adoption of Now Assist is driving demand for AI Control Tower and RaptorDB Pro. In the first quarter, AI Control Tower’s average deal sizes more than doubled sequentially, while RaptorDB Pro deal volume increased 80% year over year. Rising customer adoption and higher AI revenue expectations are positioning Now Assist to become an important driver of ServiceNow's AI growth strategy.
However, ServiceNow is integrating several acquisitions at the same time, including Moveworks, Armis, Veza and Pyramid Analytics. As a result of its back-to-back acquisitions, ServiceNow will need to integrate the acquired products, employees, technologies and sales teams into its existing business. As a result, the company will incur higher costs. These costs are expected to hurt the company's profitability before the benefits of synergies from acquisitions are fully realized.
For instance, the Armis acquisition is also expected to put pressure on profitability in 2026. Management expects Armis to reduce 2026 subscription gross margin by 25 basis points, operating margin by 75 basis points and free cash flow margin by 200 basis points. 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, the revenue contribution from these businesses could take longer to materialize.
The Case for Atlassian Stock
Atlassian's cloud business remained a key growth driver in the third quarter of fiscal 2026. Cloud revenues increased 29% year over year to more than $1.1 billion, helping total revenues grow 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 is playing an important role in this growth. Management said customers using its AI product, Rovo, are growing their annual recurring revenues (ARR) at about twice the rate of customers that do not use Rovo. Rovo's credit usage is growing more than 20% month over month, while millions of users are actively using the platform. In addition, more customers are adopting Teamwork Collection, which combines Jira, Confluence, Loom and Rovo into one offering. This bundle is helping Atlassian sell more products to existing customers and increase cloud spending.
The company's cloud business is benefiting from steady enterprise adoption. Management said cloud migrations from the Data Center remain on track and are expected to contribute mid- to high-single-digit cloud growth over time. TEAM's seat expansion remains healthy, while Net Revenue Retention stayed above 120% in the third quarter, as customers continue to adopt more products and expand their spending across the Atlassian platform.
The above-mentioned factors show that Atlassian's cloud business appears well positioned for continued growth. Rising AI adoption, 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 biggest growth driver in the coming quarters.
How do Earnings Estimates Compare for NOW & TEAM?
The Zacks Consensus Estimate for NOW’s 2026 EPS is pegged at $4.13, unchanged over the past 30 days, indicating year-over-year growth of 17.7%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for TEAM’s fiscal 2026 EPS is pinned at $5.48, unchanged over the past 30 days, indicating year-over-year growth of 48.9%.
Image Source: Zacks Investment Research
NOW vs. TEAM: Price Performance and Valuation
Year to date, shares of NOW and TEAM have plunged 29.7% and 45.2%, respectively.
NOW Vs. TEAM: YTD Price Return Performance
Image Source: Zacks Investment Research
Currently, TEAM is trading at a forward sales multiple of 3.06X, lower than NOW’s forward sales multiple of 6.26X. TEAM’s reasonable valuation makes it more attractive for investors looking for value and stability.
NOW vs. TEAM: Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Conclusion: TEAM Has an Edge Over NOW
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 as a result of its back-to-back acquisitions, which could hurt the company’s prospects in the near term.
In contrast, Atlassian shows steadier execution, where the company is witnessing strong momentum in its cloud business, driven by robust adoption of its AI products. TEAM’s reasonable valuation offers some downside protection as well, giving TEAM a clear edge over NOW.
View the Zacks #1 Rank List
Image: Bigstock
ServiceNow vs. Atlassian: Which Cloud Software Stock Has an Edge?
Key Takeaways
ServiceNow (NOW - Free Report) and Atlassian (TEAM - Free Report) are two of the most important enterprise cloud software companies, helping large organizations modernize operations, automate workflows and manage critical business processes.
While both benefit from long-term digital transformation trends, their business momentum and execution profiles differ meaningfully. For investors trying to choose between these two software leaders, a closer look at their fundamentals, growth outlook and risks helps determine which stock currently offers a stronger investment case.
The Case for ServiceNow Stock
ServiceNow has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. The company expects to achieve $1.5 billion in AI revenues in 2026 on the back of rising adoption of ServiceNow's AI products, such as Now Assist, across its customer base, where customers are deploying AI faster and on a much larger scale.
Deals including three or more Now Assist products grew nearly 70% year over year in the first quarter, suggesting 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 are increasingly moving from AI pilots to full production deployments across their organizations and are now investing in AI across multiple business functions.
Now Assist is also helping ServiceNow grow other AI products. The company stated that the adoption of Now Assist is driving demand for AI Control Tower and RaptorDB Pro. In the first quarter, AI Control Tower’s average deal sizes more than doubled sequentially, while RaptorDB Pro deal volume increased 80% year over year. Rising customer adoption and higher AI revenue expectations are positioning Now Assist to become an important driver of ServiceNow's AI growth strategy.
However, ServiceNow is integrating several acquisitions at the same time, including Moveworks, Armis, Veza and Pyramid Analytics. As a result of its back-to-back acquisitions, ServiceNow will need to integrate the acquired products, employees, technologies and sales teams into its existing business. As a result, the company will incur higher costs. These costs are expected to hurt the company's profitability before the benefits of synergies from acquisitions are fully realized.
For instance, the Armis acquisition is also expected to put pressure on profitability in 2026. Management expects Armis to reduce 2026 subscription gross margin by 25 basis points, operating margin by 75 basis points and free cash flow margin by 200 basis points. 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, the revenue contribution from these businesses could take longer to materialize.
The Case for Atlassian Stock
Atlassian's cloud business remained a key growth driver in the third quarter of fiscal 2026. Cloud revenues increased 29% year over year to more than $1.1 billion, helping total revenues grow 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 is playing an important role in this growth. Management said customers using its AI product, Rovo, are growing their annual recurring revenues (ARR) at about twice the rate of customers that do not use Rovo. Rovo's credit usage is growing more than 20% month over month, while millions of users are actively using the platform. In addition, more customers are adopting Teamwork Collection, which combines Jira, Confluence, Loom and Rovo into one offering. This bundle is helping Atlassian sell more products to existing customers and increase cloud spending.
The company's cloud business is benefiting from steady enterprise adoption. Management said cloud migrations from the Data Center remain on track and are expected to contribute mid- to high-single-digit cloud growth over time. TEAM's seat expansion remains healthy, while Net Revenue Retention stayed above 120% in the third quarter, as customers continue to adopt more products and expand their spending across the Atlassian platform.
The above-mentioned factors show that Atlassian's cloud business appears well positioned for continued growth. Rising AI adoption, 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 biggest growth driver in the coming quarters.
How do Earnings Estimates Compare for NOW & TEAM?
The Zacks Consensus Estimate for NOW’s 2026 EPS is pegged at $4.13, unchanged over the past 30 days, indicating year-over-year growth of 17.7%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for TEAM’s fiscal 2026 EPS is pinned at $5.48, unchanged over the past 30 days, indicating year-over-year growth of 48.9%.
Image Source: Zacks Investment Research
NOW vs. TEAM: Price Performance and Valuation
Year to date, shares of NOW and TEAM have plunged 29.7% and 45.2%, respectively.
NOW Vs. TEAM: YTD Price Return Performance
Image Source: Zacks Investment Research
Currently, TEAM is trading at a forward sales multiple of 3.06X, lower than NOW’s forward sales multiple of 6.26X. TEAM’s reasonable valuation makes it more attractive for investors looking for value and stability.
NOW vs. TEAM: Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Conclusion: TEAM Has an Edge Over NOW
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 as a result of its back-to-back acquisitions, which could hurt the company’s prospects in the near term.
In contrast, Atlassian shows steadier execution, where the company is witnessing strong momentum in its cloud business, driven by robust adoption of its AI products. TEAM’s reasonable valuation offers some downside protection as well, giving TEAM a clear edge over NOW.
Currently, NOW and TEAM carry a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.