Law firms saw surge in demand and profits in 2025, new report says
The U.S. legal market has experienced “a tectonic shift,” with profits per lawyer at Am Law 100 law firms increasing nearly 54% since 2019, according to a new report. (Image from Shutterstock)
The U.S. legal market has experienced “a tectonic shift,” with profits per lawyer at Am Law 100 law firms increasing nearly 54% since 2019, according to a new report from Thomson Reuters and the Center on Ethics and the Legal Profession at the Georgetown University Law Center.
The 2026 Report on the State of the US Legal Market, which was released Wednesday, also notes that changes in client expectations, regulations, the economy and technology drove a surge in legal demand over the course of last year. It shows that responding firms, which included 50 Am Law 100 firms, 58 Am Law Second Hundred firms, and 76 midsize U.S.-based firms, hit a high of 4.4% demand growth in July, while averaging 2.5% for all of 2025.
“Law firms are facing a fundamental shift in the legal industry’s economic landscape, standing at a critical inflection point where they must navigate evolving client demands, rising expenses and a necessary transformation of their operating models,” said Raghu Ramanathan, the president of legal professionals for Thomson Reuters, when announcing the report.
“The shifting landscape will unlock further demand and lead certain law firms to becoming fully tech-centric employing tech-pricing structures, as other law firms move towards being an elite, partner-heavy boutique dedicated to delivering highly specialized and bespoke legal counsel,” Ramanathan added.
Investment in technology increased by nearly 10% between 2025 and 2024 as more firms move to leverage generative artificial intelligence, according to the report. At the same time, spending on lawyer compensation jumped more than 8% compared to 2024.
“The law firms that will define the next era of legal services will be determined not by how much they invest in technology and talent but by how boldly they reimagine their entire operating model,” Ramanathan said.
The report points out that the “legal industry has a peculiar historical habit of surging just before it stumbles,” as evidenced in 2007 before Lehman Brothers collapsed and in 2021 and 2022 during the COVID-19 pandemic.
To best position themselves for the future, firms must modernize pricing models, strengthen client trust and deploy technology in measurable, valuable ways, the report suggests.
Write a letter to the editor, share a story tip or update, or report an error.
