Reuters Tracks Financial Divide Between Am Law 100 and Midsize Firms

The financial divergence between different categories of US law firms is widening, as Zoe Miranda of the Thomson Reuters Institute writes. The Am Law 100 firms are accelerating on nearly every key performance measure while midsize firms are struggling to keep pace despite maintaining respectable demand figures.

Thomson Reuters Institute’s Q1 2026 Law Firm Financial Index provides a detailed look at how these structural gaps are forming and deepening.

For years, midsize firms have occupied a competitive middle ground, serving clients that larger firms may overlook and differentiating on service and relationships. However, the legal market is increasingly bifurcating, with elite firms leveraging strong rate growth to reinvest in infrastructure, talent, and technology. Those advantages are compounding over time and proving difficult to match.

The Q1 2026 data reveals that midsize firms grew their worked rates by just 5.3%, roughly half the Am Law 100’s 9.8%. In terms of demand growth, the Am Law Second Hundred pulled ahead with 3.9% demand growth, outpacing their midsize competitors with a growth of just 2.6%.

Midsize firms recorded the highest direct cost growth at 5.4% while simultaneously posting the lowest technology investment growth of any segment at 6.2%. Recruitment spending declined slightly by 0.2%, in sharp contrast to Second Hundred firms investing 5.6% more in lateral talent.

Managing legal operations across multiple competitive tiers is increasingly consequential as profitability trajectories diverge. Outside counsel spend decisions may shift as rate differentials between firm segments widen further.

Board governance and fiduciary duties at midsize firms warrant attention, given the long-term strategic implications of under-investment in technology and talent.