Law Firms Reach New Heights Amid Historic Demand Surge – Thomson Reuters
Technology investment continues to skyrocket, with the pace accelerating
Thomson Reuters, a global content and technology company, issued a new report today showing the legal industry experienced unprecedented growth in the third quarter of 2025, marking its fourth-highest quarter for demand in the past two decades.
According to the Q3 2025 Thomson Reuters Law Firm Financial Index (LFFI), powered by Financial Insights, demand within the legal sector surged 3.9% compared to Q3 2024. Unlike prior peak quarters for demand, which occurred in 2021 as law firms recovered from early pandemic declines, Q3 2025 reflects sustained and robust client activity, signifying genuine expansion beyond merely returning to baseline pre-pandemic level.
Transactional practices were the primary drivers of this growth, with Midsize law firms posting a 6.1% increase in demand compared to the previous year. All transactional segments reported heightened activity, led by mergers & acquisitions (M&A), which saw a 7.6% year-over-year increase. Other key practice areas also contributed, with litigation up 4.9%, corporate law rising 4.3%, real estate advancing 4.2%, and labor & employment increasing 4.0%.
Reflecting this strong performance, law firms boosted average revenue per lawyer by 6.6% year-over-year and are on track to achieve double-digit profit growth for the full year.
Direct expenses continued to grow at a steady pace, while overhead expenses rose more rapidly – primarily due to notable investments in technology. On a rolling 12-month average, technology spending jumped to 11.2% in Q3 2025, marking the third consecutive year of significant investment and an ongoing acceleration in the rate of technology adoption across the industry.
“The third quarter was extraordinary with a significant surge in demand, especially for transactional work, reflecting an active corporate environment despite global uncertainties,” said Raghu Ramanathan, president, Legal Professionals, Thomson Reuters. “Law firms are sensibly balancing this tremendous growth by making strategic investments in technology and talent, taking advantage of current conditions to ensure their firms remain competitive and continue providing high-level service to clients.”
A copy of the Q3 2025 LFFI report can be downloaded here.
The LFFI, produced by the Thomson Reuters Institute, is a composite index of law firm market performance using Financial Insights data drawn from major law firms in the United States and key international markets.
