"A new Thomson Reuters Report reveals a fundamental disconnect between what law firms believe about AI and what clients may soon demand. This disconnect exposes an uncomfortable truth for firms: future legal work will require less time with fewer lawyers and, conceivably, less revenue. It creates a gap can't be closed simply by raising rates and cutting expenses. Instead, it may require a different business model altogether."
"As a result, firms are racing to capitalize by loading up on talent and technology. Technology spending is up nearly 10% and talent costs up 8.2% over 2024. Hourly rates have also increased dramatically. Profits are also soaring and to be blunt, partners are sitting fat, dumb, and happy. According to the report, many have concluded that throwing money at technology and talent, raising rates, and watching the profits roll in is working out just fine. There's no reason to change anything."
Law firms experienced strong demand and average profit growth of 13.0% in 2025, the strongest growth in more than a decade. Firms increased technology spending nearly 10% and talent costs 8.2% over 2024, and hourly rates rose sharply. Many firms expanded headcount and investments, driving soaring profits. Meanwhile, generative AI offers substantial efficiency gains that can cut lawyer hours per task dramatically. General counsel seeking reduced legal spend may pressure firms to deliver faster, cheaper work with fewer lawyers, potentially reducing firm revenue and requiring alternative fee arrangements or fundamentally different business models.
Read at Above the Law
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