Executive summary
Midsize law firms1 in the United States are enjoying an extended moment in the spotlight. Year-end results from 2024 found midsize firms once again near the front of the pack in terms of demand growth among all segments of law firms tracked by the Thomson Reuters Institute.
At the same time, midsize law firms have gotten much more aggressive in growing their hourly rates in recent years compared to historical standards, placing them in a more favorable revenue picture. A few factors have tempered this growth in rates, however.
First, midsize law firms haven't been as aggressive in growing their rates as their competitor segments. This has created a bit of a double-edged sword — midsize law firms are missing opportunities to push for stronger rate growth, but they're clearly maintaining a cost advantage over their larger peers.
Second, expenses have grown for the average midsize law firm, dampening the prospects for further profit growth. The average midsize law firm was still much more profitable at the end of 2024 than it was at the end of 2019. However, profit growth for midsize firms was much lower than those firms in either the Am Law 100 or Am Law Second Hundred. This negated some of the advantage midsize firms had enjoyed from continued strong demand growth.
Even coming off this prolonged period of growth, however, midsize law firms shouldn’t get too comfortable with their success. The legal market is constantly evolving, and never more rapidly than now. Larger law firms have teams of people dedicated to driving innovation, both in their internal processes and in their client-facing functions. Midsize law firms that choose to rely on increasingly outdated ways of working could run the risk of being outcompeted by larger firms that have taken advantage of newer technologies to create service offerings that clients find both appealing and affordable.
Of course, that isn't to say that midsize law firms need to employ innovation teams of similar size or ability to be able to compete with larger rivals; however, midsize firms would be well advised to do their own explorations of emerging technologies and learn how they might be employed to help firms maintain, if not grow, their existing competitive advantages.
Understanding the key measures
Law firm performance is tracked through a host of metrics, but a few key measures provide an effective overview of the overall health of any given segment of the market.
Even absent a comparative context, it's immediately noteworthy that all of the key performance indicators (KPIs) are in positive territory, including productivity. As was noted in the 2025 Report on the State of the U.S. Legal Market,2 productivity is one of the key metrics that the average law firm has struggled to move into positive territory. In fact, the overall legal market has seen a nearly 15-year trend of declining productivity.3 The fact that midsize law firms kept productivity in positive territory even considering 2.7% growth in headcount over 2024 stands as a testament to the strength of demand growth for the segment.
However, some comparison of midsize firms’ KPIs to those in other segments provides important context.
While the strength of demand growth for midsize law firms is notable, particularly given the years-long pattern of growth these firms have enjoyed, midsize law firms are still third concerning growth of worked rates and fees worked.4 The lag in these metrics, particularly fees worked, coupled with growth in expenses, contributed to the less-impressive growth in profits that midsize firms experienced since 2019, which we will explore in more detail later.
Demand
As demand measures total billable hours worked, it's worth exploring this metric in greater detail.
The average midsize law firm saw demand growth across a wide spectrum of practice areas.
Importantly, midsize law firms saw growth in both counter-cyclical and transactional practices.5 Regarding the latter, while M&A demand grew by 2.6% and corporate work grew by 2.4%, the segment’s overall average growth in transactional practices lagged behind larger firms, which saw their transactional practices grow more significantly.
The key driving force for growth among midsize law firms in 2024 was certainly litigation, which grew by 4.6%. While this scale of demand growth is impressive, it's a bit worrying. If, as some predict, litigation work experiences slower demand growth or even some contraction in 2025, midsize law firms could find it difficult to continue their long streak of strong overall demand growth.
Billing rates
Given concerns over potential instability in demand growth for midsize law firms going forward, even greater importance can be placed on the growth of law firm billing rates, particularly worked rates.
Midsize law firms trail their peer segments regarding the aggressiveness with which they have pursued growth in worked rates. While three-tenths of a percentage point may not seem significant, remember that the growth figure is expressed as a function of the previous year’s billing rates. So, that means that the average Am Law Second Hundred law firm was growing three-tenths of a percent more on an already higher average hourly rate.
That isn't to suggest, however, that midsize law firms haven't made progress in pushing their rates. The segment’s year-end 2024 worked rate growth of 5.6% represents an improvement on 2023’s 5.4% growth and a large improvement on the 3.8% growth seen by the average midsize law firm at the end of 2022.
Midsize law firms have also done a good job of capturing those rate increases, closing out 2024 with an average realization against worked rates of 91.8%, an improvement over the previous year.
Expenses and profits
Small law firms were less likely to see expected revenue growth than larger firms because their fees worked were growing slower. When expense growth is added to that picture, the result is good, but far from leading growth in law firm profits.
The average midsize law firm experienced direct expense growth mostly in line with the average firm in the market. At the same time, midsize law firms held overhead expenses in check compared to the market average. Similar to the overall market, technology and knowledge management expenses were the key drivers of overall expense growth for the midsize segment, with the former growing by 8.6%. That sits on top of 9.6% growth in technology expenses for the same period the previous year, indicating continued strong investment in technology by midsize law firms. In fact, these firms increased both their technology and knowledge management by larger percentages than the average Am Law 100 law firm.
The combined effect of these increased expenses and slower growth in fees worked was slower overall growth in profits per lawyer. That’s not to say that the average midsize law firm has particularly struggled — they were, on average, 17.5% more profitable at the end of 2024 than they were at the end of 2019.
No time for midsize law firms to rest on success
There’s no doubt that midsize law firms have experienced a very successful period over the past several years. Increasing success in growing billing rates and improved profits show that thus far, the 2020s have been a good decade for midsize law firms.
With that success, however, comes the risk of complacency.
As larger competitors seek to move more aggressively toward an AI-driven future, they will redefine how legal services are delivered and, ultimately, how they are priced. Given the promises of AI in terms of streamlining workflows, eliminating waste, and automating many low-value tasks, larger law firms may be able to start competing with midsize firms on price much more effectively than they do now, jeopardizing a major go-to-market advantage for the midsize segment. This is especially true for those midsize law firms that haven't yet built the ability to use similar efficiencies in service.10
Leaders of midsize law firms should also be aware that other law firms aren't the only threat. Corporate general counsel (GC) — the clients that nearly every midsize law firm targets as part of their strategic growth plans — are increasingly looking to move toward the front of the AI adoption curve. In the six-month period from April to October 2024, the number of GCs who described themselves as followers on the AI adoption curve decreased while the number seeking to be early adopters increased. As a result, more GCs now seek to be AI leaders than followers — a feat law firms in general have yet to fully accomplish.
If midsize law firms don't keep up with the legal industry, they could lose work to other law firms and to the clients they depend on to get the work.
Conclusion
Midsize law firms are in a strong position in the legal market. They command a large share of the lucrative litigation sector, which is still growing in 2025 based on early indications. They can offer clients a sizable cost advantage compared to their peers, an attribute viewed as an asset by increasingly cost-conscious clients. Midsize firms have enjoyed relatively healthy profits, creating ready cash for needed investments in technology.
It seems safe to say that among the most damaging decisions midsize law firms could make would be to become complacent. Short of that, any decision made toward a greater focus on business development that seeks more transactional work, an increased pace of rate growth, or greater investment in the adoption and implementation of advanced technology will likely yield additional positive results.
Credits
Mike Abbott
Head of Thomson Reuters Institute
Michael.Abbott@thomsonreuters.com
William Josten
Senior Manager – Enterprise Legal Thought Leadership – Thomson Reuters Institute
William.Josten@thomsonreuters.com
Isaac Brooks
Manager, Industry Data Analytics - Thomson Reuters Institute
Isaac.Brooks@thomsonreuters.com
Bryce Engelland
Senior Industry Data Analyst - Thomson Reuters Institute
Bryce.Engelland@thomsonreuters.com
Steve Seemer
Senior Director, Thought Leadership and Strategic Relations - Thomson Reuters Institute
Stephen.Seemer@thomsonreuters.com
Thomson Reuters
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