State of the Market; Practice Area Demand Growth; Legal Spend
Thomson Reuters recently released its 2026 State of the Legal Market, analyzing 2025 and making predictions for 2026 (2026 Report on the State of the U.S. Legal Market "Report", Thomson Reuters in partnership with Georgetown Law Center on Ethics and the Legal Profession, 1/7/26. In sum, 2025 was a very good year for the law firms studied (184 US-based law firms including 50 AmLaw 100 firms, 58 Second Hundred firms, and 76 Midsize firms).
The average firm achieved 13% profit growth and 1.9% demand growth for the year, registering the third best year for demand growth since the Great Financial Crisis. These results were on top of an already strong 2024. For perspective, law firms averaged only 0.6% quarterly year-over-year demand growth since the beginning of the 2010s, and any significant growth during that period was typically a rebound from a large dip.
Midsize firms captured a disproportionate share of this demand growth, as clients shifted work away from firms with higher rates toward lower-cost alternatives. Notably, the AmLaw 100 required a strong Q3 to eke out .1% demand growth on the year.
Practice Area Demand
Both transactional and countercyclical practices saw significant demand growth in 2025, a relative rarity.
Legal Spend
Thomson Reuters notes that General Counsels may be considering "significant spending pullbacks" in 2026. However, an analysis of the underlying data reveals that statement may be a bit alarmist. While it's true that the delta between those GCs who plan to increase spending in 2026 and those who plan to decrease spending shrunk over the course of 2025, more GCs planned to increase legal spend in 2026 than to decrease (35% vs. 22%, as of Q3 2025, the last survey reported). See Report based on surveys with GCs of companies with more than $1B in annual revenue.
The data does show, however, a significant shift of work to relatively lower cost providers. As Thomson Reuters explains, "Midsize firms surged ahead with nearly 5% demand growth in the latter half of the year while the Am Law 100 couldn’t crack 2%, resulting in the largest percentage point-spread gap in demand between the top and bottom segments since the GFC [Great Financial Crisis]." Thomson Reuters chalks this up to the challenge GCs faced with navigating a slowing economy and the "legal chaos of the Trump administration." This forced GCs to shift not just routine matters, but also more complex work to firms with lower rates. This shifting resulted in clients spending less per hour on legal services in 2025 than in 2024, despite the average law firm’s worked rates increasing 7.3% in 2025.
