Atlassian (TEAM Quick QuoteTEAM - Free Report) and ServiceNow (NOW Quick QuoteNOW - 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 Atlassian Stock

Atlassian is seeing higher AI adoption help drive customer expansion. In the fourth quarter of fiscal 2026, revenues increased 28% year over year, while cloud revenues grew 31% year over year. Further, RPO increased 44% year over year, and subscription ARR grew 23% year over year. Customers are signing larger deals, adding more seats and using more Atlassian products as they adopt AI.

Rovo is playing an important role in this trend. More than 80% of Fortune 500 companies now use Rovo, while Rovo-assisted actions increased 50% sequentially in the fourth quarter. Further, customers using Rovo are growing their ARR at more than twice the rate of customers that do not use Rovo. The strong adoption and higher usage suggest that Rovo is becoming an important part of Atlassian's efforts to increase spending within its existing customer base.

Rovo is also helping Atlassian increase revenues from existing customers. As Rovo usage rises, customers are buying more Rovo credits. Teamwork Collection offers about 10 times more Rovo credits and is encouraging customers to upgrade and add seats. Atlassian said these upgrades are helping increase average revenue per user. Teamwork Collection customers also have 4-5 times more paid seats per instance than stand-alone Jira or Confluence customers. This gives Atlassian an opportunity to convert higher Rovo usage into more seats, broader product adoption and higher revenue per customer.

The Teamwork Graph is another key part of Atlassian's AI strategy. The graph now spans more than 200 billion objects and connections and is designed to give AI agents better access to enterprise data and context. Management said AI and the Teamwork Graph are among the top two reasons customers upgrade to the cloud and Teamwork Collection. The company also reported record activity in large enterprise deals, with customers generating more than $3 million in ARR growing over 50% year over year and those with more than $5 million growing over 70%.

Higher AI adoption is also helping Atlassian's cloud business. Cloud revenues increased 31% year over year in the fourth quarter. Management said cross-selling and seat expansion were the main drivers behind the strong cloud momentum. The company also saw strong adoption of Teamwork Collection and Service Collection, while customers continued to add Jira and Confluence seats. As customers use AI across more teams and workflows, Atlassian could have more opportunities to expand its platform within large enterprise accounts.

The above-mentioned factors show that rising AI adoption, cross-selling and seat expansion should support Atlassian's growth prospects in the upcoming quarters. The Zacks Consensus Estimate for TEAM's fiscal 2027 and 2028 revenues indicates year-over-year growth of 13.01% and 14.78%, respectively.

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The Case for ServiceNow Stock

ServiceNow is seeing strong demand for its Agentic AI products, which could become an important growth driver for the company. In the second quarter of 2026, ServiceNow’s AI annual contract value (ACV) crossed $1 billion and beat management’s expectations. AI net new ACV growth also accelerated more than 40% sequentially. The company said it is already tracking ahead of its goal to have AI account for 30% of ACV by 2030.

Customer adoption is also increasing quickly. The number of customers with Agentic AI in production has grown 9x over the past nine months. ServiceNow is also seeing more customers adopt AI for the first time. Deal volume among first-time Agentic AI buyers increased more than 45% year over year in the second quarter. This shows that AI growth is not coming only from existing customers expanding their use. New customers are also starting to adopt ServiceNow’s AI products.

ServiceNow is also using AI-native products to make adoption easier. The company said these new products are helping bring Agentic AI to a broader customer base. Customers upgrading to the new AI-native SKUs are generating pricing increases in the 20-30% range, in line with the company’s target. This gives ServiceNow an opportunity to increase both AI adoption and revenue per customer as more workloads move to its platform.

The growth opportunity could become larger as customers expand their AI use cases. ServiceNow said customers are moving beyond basic generative AI toward areas such as incident management, resolution planning, triage and case management. As customers use AI across more departments and workflows, the company sees additional cross-sell opportunities. This could help increase AI consumption over time and strengthen ServiceNow’s position as a broader workflow and orchestration platform. The Zacks Consensus Estimate for NOW's 2026 and 2027 revenues indicates year-over-year growth of 22.02% and 18.52%, respectively.

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However, ServiceNow expects accelerating AI consumption and greater reliance on hyperscalers to put some pressure on gross margins in the near term. In the second quarter of 2026, ServiceNow’s non-GAAP total gross margin was 78%, down from 81% a year earlier. Although management expects scale, lower infrastructure costs and more efficient AI models to ease this pressure over time, a faster-than-expected shift toward AI workloads could limit margin expansion in the near term.

TEAM vs. NOW: Price Performance and Valuation

Year to date, shares of TEAM have surged 18.8%, while NOW shares have plunged 7.1%.

TEAM Vs. NOW: YTD Price Return Performance

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Currently, TEAM is trading at a forward sales multiple of 5.96X, lower than NOW’s forward sales multiple of 7.48X. TEAM’s reasonable valuation makes it more attractive for investors looking for value and stability.

NOW vs. TEAM: Forward 12-Month P/S Ratio

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Conclusion: TEAM Has an Edge Over NOW

Both Atlassian and ServiceNow are well-positioned to benefit from the AI wave. However, ServiceNow faces near-term pressure on gross margins as rising AI consumption and greater reliance on hyperscalers increase infrastructure costs, which could weigh on 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, TEAM carries a Zacks Rank #3 (Hold), giving the stock a clear edge compared to NOW, which has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.