Australia’s legal sector is undergoing a transformation, driven by strategic competition, technological disruption — especially around GenAI — and a growing need for adaptability as firms redefine how legal services are delivered and valued
Key findings:
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- Large firms are disrupting the traditional hierarchy — Large firms have outpaced the Big 8 in growth and profitability by scaling aggressively and capturing market share.
- However, geoeconomic disruption has favored the Big 8 — When global conditions shifted, Big 8 firms saw a significant increase in performance as Large firms began to faulter.
- GenAI is reshaping legal operations — Australian firms are leading globally in adoption of AI, leveraging advanced tech to boost efficiency, training, and client service.
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With the end of the 2024 Australian financial year (FY 2024) in June, the market concluded one of its most dynamic years, marked by fierce competition, strategic evolution, and technological disruption.
To examine these factors more deeply, the Thomson Reuters Institute has published its Australia State of the Legal Market 2025, a joint publication with Melbourne Law School, which offers a comprehensive view of the evolving landscape for the Australian legal market.
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Australia State of the Legal Market 2025
The latest report reveals a market split between two dominant groups that are taking very different approaches to the racetrack. First, the prestigious Big 8 law firms, which have traditionally found success leaning on legacy and rate strength; and second, the rapidly rising Large law firms, which were beginning to outpace the pack by pursuing aggressive growth and scaling.
At the start of the most recent leg of this race (the beginning of FY 2024), Large firms seemed likely to continue their streak of aggressive growth in which they’ve been outpacing the Big 8. However, in the last couple months of the past fiscal year, conditions changed in a way that may reshape the competition for the foreseeable future.
Strong performance amid challenges
Despite strong performance across the sector, the report highlights several challenges that firms must address. For example, talent management is becoming increasingly complex as firms expand and compete for skilled professionals, with direct expenses facing sharp acceleration. For years, Australian firms have been in an aggressive growth phase, pushing to capture a veritable cornucopia of legal demand. Now, as demand growth seems to be faltering, these firms are having to grapple with tough decisions regarding the growth they’re continuing to see in headcount and expenses.
Meanwhile, the rise of generative AI (GenAI) is shifting client expectations and challenging traditional pricing models, pushing firms to rethink how they deliver and value their legal service offerings. While GenAI may well have unlocked greater capacity for these firms to provide additional value per hour, it also poses challenges to the ways firms provide services and measure productivity. Australian firms have spent significantly to digitally transform their services, but a stress test for these innovations may well be around the corner.
Looking ahead, adaptability will be critical, the report shows. Australian law firms must use the momentum of a still profitable year to sharpen their operations — from technology integration to client engagement strategies. Those firms that embrace change and align their models with evolving client needs will be best positioned to thrive in a more volatile and fast-moving legal landscape. However, those that assume the strategies of the past will continue to serve them well may find themselves left behind. Indeed, Large firms have exemplified the value of adopting change and a growth mindset since the pandemic, yet the Big 8 are now suggesting that another turning point is already underway.
Ultimately, the future of Australia’s legal market won’t be decided by size or legacy alone. How this race ends will depend on how adaptable these firms are to the changing conditions on the track.
You can download
a full copy of the Australia State of the Legal Market 2025 report, from the Thomson Reuters Institute and Melbourne Law School here
