ServiceNow vs. Atlassian: Which ITSM Provider Has Greater Upside?

ServiceNow NOW and Atlassian TEAM are well-known providers of IT Service Management (ITSM) solutions. ServiceNow, through its Now Platform, and Atlassian, through the Jira Service Management, have been leveraging AI to improve the potency of their respective offerings. 

The rapid evolution of agentic AI is changing the competitive landscape in the ITSM domain, with traditional applications being replaced by virtual assistants. Gartner predicts that by 2029, agentic AI will autonomously resolve 80% of general customer issues without human intervention, leading to a 30% reduction in costs. This trend benefits both ServiceNow and Atlassian, but not equally. Let’s find out which stock is poised to gain the most.

NOW’s Strong Portfolio, Rich Partner Base Key Catalyst

The Now Platform has embedded Now Assist, ServiceNow’s AI solution, available for certain products at an additional cost. NOW’s Yokohama release is bringing new AI agents across varied domains, including CRM, HR and IT, delivering enhanced productivity as well as smoother and smarter functioning of workflows. 

NOW benefits from a rich partner base that includes Amazon, NVIDIA, Microsoft and DXC Technology. NVIDIA and NOW collaborated to launch AI agents for the telecom industry. The AI agents were built with NVIDIA AI Enterprise software and the AI platform NVIDIA DGX Cloud.

A strong portfolio and rich partner base are expanding NOW’s clientele. Exiting fourth-quarter 2024, NOW had 2,109 total customers with more than $1 million in annual contract value, which represents 14% year-over-year growth in customers. While Pro Plus AI grew 150% sequentially, the number of customers who bought two or more of NOW’s GenAI capabilities doubled quarter over quarter.

Atlassian Rides on Strong Demand for AI Features

Atlassian has infused AI features across all its major products, including JIRA, Confluence, Bitbucket, and Trello, providing users with improved means for knowledge discovery and task automation. In the second quarter of fiscal 2025, more than one million monthly active users engage with Atlassian’s AI features every day. TEAM experienced a surge in customers adopting higher-value products infused with AI, leading to a 40% year-over-year increase in TEAM’s Premium and Enterprise edition sales.

Atlassian has a rich partner base comprising the likes of Amazon and Zoom Communications that enhances TEAM products with rich features. The company’s partnership with Microsoft-backed Open AI has helped enhance the capabilities of its Confluence, Jira Service Management and other programs with GenAI features. Atlassian is offering GenAI-enabled features under the Atlassian Intelligence brand, which is designed to help employees be more efficient while users remain in control of data.

A rich partner base, along with a strong AI-supported portfolio, is helping TEAM in expanding clientele from small and medium businesses to enterprises. Atlassian closed a record number of deals worth more than $1 million in the second quarter of fiscal 2025. TEAM now has over 500 customers, spending more than $1 million annually, indicating strong enterprise penetration.

TEAM Shares Outperform NOW

Both Atlassian and ServiceNow shares have suffered from tech sell-off year-to-date (YTD) due to the escalating trade war situation post-U.S. President Donald Trump’s decision to levy tariffs on trading partners, including China, Canada and Mexico. While TEAM shares have lost 11.1% YTD, NOW plunged 23.5%.

TEAM and NOW Stock’s Performance

Image Source: Zacks Investment Research

The sharp drop in ServiceNow shares can be attributed to unfavorable forex ($175 million impact) and back-end loaded federal business to hurt subscription revenues in 2025. NOW’s strategy to accelerate the adoption of its Agentic AI by foregoing immediate revenues is expected to affect the subscription revenue growth rate in 2025. 

NOW expects subscription revenues to be $12.635-$12.675 billion, which suggests a rise of 18.5% to 19% from 2024 on a GAAP basis and 19.5% to 20% on a non-GAAP basis. 

Meanwhile, Atlassian expects revenues to grow in the range of 18.5-19% year over year in fiscal 2025. Atlassian expects the non-GAAP gross margin to be 84.5% and the operating margin to be 23.5% for fiscal 2025.

TEAM’s Earnings Estimate Revision Positive, NOW’s Goes South

The Zacks Consensus Estimate for TEAM’s fiscal 2025 earnings is pegged at $3.47 per share, up 3 cents over the past 30 days, indicating an 18.43% increase over fiscal 2024’s reported figure.
 

However, the consensus mark for NOW’s 2025 has declined by three cents to $16.21 per share over the past 30 days, suggesting 16.45% growth over 2024.

Both NOW’s and TEAM’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. However, Atlassian’s average surprise of 27.87% is better than NOW’s surprise of 7.02%, reflecting good quality of earnings beat on a consistent basis.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Valuation: TEAM is Cheaper than NOW

Valuation-wise, both Atlassian and ServiceNow are overvalued, as suggested by the Value Score of F. 

In terms of forward 12-month Price/Sales, TEAM shares are trading at 9.6X, lower than NOW’s 12.23X.

TEAM and NOW Valuation

Image Source: Zacks Investment Research

Conclusion

Atlassian’s focus on fast penetrating enterprise cohorts through the use of AI bodes well for the company’s prospects. However, ServiceNow’s near-term growth trajectory is expected to face some volatility due to unfavorable forex and back-end loaded federal business.

Currently, Atlassian has a Zacks Rank #3 (Hold), making the stock a stronger pick compared with ServiceNow, which has a Zacks Rank #4 (Sell).

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

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This article originally published on Zacks Investment Research (zacks.com).

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