Alopecia areata (AA) is a disease that happens when the immune system attacks hair follicles and causes hair loss. AA usually affects the head and face, but hair loss can happen on any part of the body. The purpose of this study is to assess how safe, effective, and tolerable upadacitinib is in adolescent and adult participants in Japan with severe AA. Upadacitinib is an approved drug being investigated for the treatment of AA. In Period A, participants are placed in 1 of 3 groups, called treatment arms. Each group receives a different treatment. There is a 1 in 3 chance that participants will be assigned to placebo. In Period B, participants originally randomized to a upadacitinib dose group in Period A will continue their same treatment in Period B. Participants originally randomized to Placebo in Period A will be re-randomized in 1 of 2 groups receiving upadacitinib. Participants who complete Period B can join Period C and will receive 1 of 2 doses of upadacitinib for up to 52 weeks based on their SALT score. Around 123 adolescent and adult participants with severe AA will be enrolled in the study at approximately 20 sites in Japan. Participants will receive oral tablets of either upadacitinib or placebo once daily for up to 104 weeks with the potential of being re-randomized into a different treatment group at Weeks 24 and 52. Participants will be followed up for up to 30 days after their last study drug dose. There may be higher treatment burden for participants in this trial compared to their standard of care. Participants will attend regular visits during the study at a hospital or clinic. The effect of the treatment will be checked by medical assessments, blood tests, checking for side effects and completing questionnaires.