U.S. Law Firms Logged a Busy Q2—But Clouds Are Building, New Report Finds

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U.S. law firms posted solid second-quarter results as clients sought counsel amid economic and geopolitical uncertainty, according to the Thomson Reuters Institute’s Law Firm Financial Index (LFFI). Overall demand rose 1.6% year over year while billing rates jumped 7.4%, lifting the index score to 55, up four points from Q1. Even so, the report warns that rising expenses, slipping productivity, and softer collections could pressure margins in the second half of 2025. Reuters

Key Q2 Numbers at a Glance

• Demand: +1.6% vs. Q2 2024
• Worked (standard) rates: +7.4% YoY
• LFFI score: 55 (↑ 4 points from Q1)
• Risks flagged: higher costs, lower productivity, unpaid bills/write-downs impacting realizations. Reuters

Uneven Growth by Firm Segment

Performance diverged by firm size. The Am Law 100 cohort saw demand slip 0.6%, while midsize and “second-tier” firms grew 2.6% and 3.5%, respectively—suggesting some clients are value-shopping or turning to specialists for targeted work. Reuters

Practice Mix: Litigation Up; IP Down

Demand improved for litigation (+2%) and was modest for corporate (+1.3%) and M&A (+0.3%), while intellectual property fell 1.4% in the quarter. The mix underscores how regulatory and dispute activity is offsetting slower deal flow. Reuters

  

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Why Firms Are Busy—and Cautious

The Institute links the Q2 lift to clients navigating volatile trade and regulatory shifts, a theme it has highlighted in 2025 coverage of legal-market performance: strong rate growth, choppy demand, and productivity headwinds entering the year. ReutersThomson Reuters

What to Watch in H2 2025

• Pricing vs. Productivity: Rate increases continue to buoy revenue, but lower hours per lawyer and rising compensation/overhead could squeeze profit if demand cools. Thomson Reuters
• Collections/Realization: The report flags unpaid bills and write-downs as growing concerns. Tight billing hygiene will matter. Reuters
• Practice Rotation: If macro risk persists, litigation/regulatory may keep gaining share; a deal rebound would shift momentum back to M&A/corporate. Reuters

Bottom Line

Q2 was better than many expected—workloads rose and rates held strong—but the recovery is uneven and pressure points are multiplying. Firm leaders should stay vigilant on staffing, realization, and mix while clients continue to prize value and practical expertise.

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