What's better? THX or Dolby Atmos?

or is there a 3rd option that should be looked at?

What use case?
Home theatre?

correct, but only 2.1.

They’re very similar.
I believe THX is often slightly cleaner in sound but Dolby is more immersive, but is mostly used for 5.1.

Also DTS:X and Auro3D, last one sounds or makes the nicest effect’s of em all. At least in a home environment.
But you could get a amp that has em all.
Then you able the change how the amp codes and changes the sound coming from source.

They all change how the surround works and sounds around the listening spot.
There’s also the location where speakers should be for specific surround.
Think Auro handles this also more better since if you have 5.1 already, just add above them for more.

Auro is a much smaller than Dolby so most movies are in that format, but you can still decode that with Auro so sends the effect where they need to be.
If you know the “virtual barber shop” with headphones, That’s what Auro does with surround, its right next to you and sound effect’s are very very nice.
Dolby a bit more away from you and DTS:X is kinda in where speaker line is, outer ring or circle.

Oh and Z also said Auro. In a heartbeat when someone asked.

Well, if you are using Atmos then technically you should be running 2.1.4 to get its effects with the overhead speakers. Thus as a direct answer to your question in this single use case scenario technically THX would be better.
From a practical standpoint i have 2 HT systems and i run one 50% of the time as a THX 5.1 system and the second as an Atmos 5.1.2. There are some movies that have great Atmos sound effects added that add a bit of sparkle and “wow” factor in the Atmos system that i don’t get in the THX system. It usually mostly has to do w/ scenes that have rain or overhead flying/shooting/passover effects added. My own personal opinion is that I enjoy the Atmos effects very much but would not spend a great deal of funds above and beyond what 5.1 THX requires to get them. This isbthe same reason i don’t run 7.1.2 or 7.2.2 or 7.4.2 THX systems even thoughbi completely have the ability to do so in both of my systems. The benefits TO ME, are such a small percentage thatbit is NOT worth the ass pain in dealing w/the actual room, decor/mounting solutions/treatment requirements needed to add those extra speakers for the limited benefits and “wow” factor provided, to ME. YMMV this really is completely a personal preference. Happy listening always.