The legal industry is ripe for innovation and law firms focused on solving the fundamental challenges surrounding technology implementation are best positioned to drive sustainable growth in the legal market. These are among the findings of the 2025 Report on the State of the US Legal Market, released today by Thomson Reuters and the Center on Ethics and the Legal Profession at Georgetown Law.
The annual report relies on data from the Thomson Reuters Institute to review the performance of U.S. law firms and explore the trends and factors shaping the U.S. legal market. Below are five takeaways from the report.
- A transformative shift is under way in the legal profession. Amid the evolution from traditional practices to innovative business models, law firms need to continue innovating and adapting to remain competitive, including implementing the latest technology, employing new business models and prioritizing client-centric practices.
- Law firm leaders should “take advantage of the benefits of a lucrative 2024.” The report noted that firms’ strong 2024 performance was defined by three metrics: demand, rates and expenses. Solid demand growth – across counter-cyclical and transactional practices – coupled with law firm billing rates accelerating at their fastest pace since the Great Financial Crisis contributed to law firms’ soaring profits, alongside expense growth levelling off.
- The impact of generative AI will continue to drive shifting market factors in 2025:
- Strategic investment in technology: Firms need to prioritize technology investments to enhance productivity and adapt to the evolving legal tech landscape in order to drive long-term growth.
- Shifting pricing paradigms: The traditional billable hour model will be challenged by alternative pricing structures that prioritize value and client-centric approaches.
- Evolving talent models: The composition of law firms is in flux, with a shift toward more experienced lateral hires, growth in two-tier partner structures and less emphasis on junior associate hiring.
- Growth may be dampened in 2025 due to potential weaker demand and global economic uncertainty. Though firms may see demand weaken in 2025, the report notes that results of the U.S. presidential election could boost demand as greater levels of economic and geopolitical instability generally see clients turn to their lawyers to mitigate risk. In addition, the 2025 outlook includes expense growth remaining at elevated levels, putting more pressure on profits.
- 2025 will require firms to continue adapting to the impact of generative AI and emerging technologies. While firms took steps in 2024 to ensure sustainable growth in a changing market, innovative firms that invest in technologies and implement strategies to update their business model in 2025 – including how they measure and reward lawyer performance – will be best positioned to achieve ongoing success.
Download the report for strategies law firms can use to adapt their business models and implement new technologies to thrive amid changing market demands and clients’ needs.
