Midsize Firms Gaining Business Amid Widening Rate Gap With Elites

The US legal market experienced its strongest demand growth in over a decade in 2025, with billable hours rising 2.5% for the year and peaking at 4.4% growth in July, according to data from the Thomson Reuters State of the US Legal Market report summarized on the company’s website.

But beneath record profitability, a widening rate gap between elite and midsize firms is fundamentally restructuring how corporate clients allocate legal work. More affordably-priced midsize firms are winning over a larger share of the business, representing one of the most significant market realignments since the global financial crisis, Thomson Reuters writes.

Am Law 100 firms have crossed the $1,000-per-hour threshold while mid-size firms average approximately $600, a differential that is driving measurable changes in client behavior. Nearly 90% of general counsel report intensifying scrutiny of outside counsel spending because resource constraints are limiting their strategic impact.

Despite firms raising rates 7.3% in 2025, clients actually spent less per hour on average legal services than in 2024, demonstrating that rate increases are accelerating “mobile demand,” the migration of legal work to lower-cost providers. Midsize firms posted nearly 5% demand growth in the second half of 2025, while Am Law 100 firms barely reached 2%.

Elite firms are strategically repositioning around ultra-premium matters: complex transactions, bet-the-company litigation, and specialized regulatory work, where clients have little choice but to pay top rates. Am Law 100 profits per lawyer have risen 53.7% since 2019.

Meanwhile, midsize and second-tier firms are capturing work that would have defaulted to larger firms a decade ago. They are hiring and leveraging technology to narrow capability gaps. In-house legal departments are increasingly demanding alternative fee arrangements and executing panel consolidation strategies.