Law Firms NAICS 541110

Oct 29, 2025 - AI Use Growing in the Legal Sector

• Artificial Intelligence is rapidly transforming the legal sector, according to Thomson Reuters’, The Future of Professionals Report 2025. Legal professionals expect to save nearly 240 hours annually per person (roughly $19,000) through AI-driven efficiencies in research, drafting, document review, and other routine tasks. Currently, about 30% of legal professionals use AI regularly to begin or refine their work, while 46% of law firms have invested in AI-powered tools over the past year, per the report. Firms with formal AI strategies are 3.5 times more likely to see a return on investment and twice as likely to experience revenue growth than firms using ad hoc approaches, highlighting a widening competitive gap. AI adoption is also reshaping staffing models and productivity expectations, allowing lawyers to focus on higher-value advisory work rather than repetitive tasks.
• US law firms are seeing record pricing power, with average work rates up 7.4% so far in 2025, according to Thomson Reuters. Strong demand for legal services; particularly in corporate, litigation, and regulatory work, has allowed firms to raise fees and take advantage of favorable market conditions. But higher rates don’t come automatically from long-standing client relationships; these connections contribute little to setting a firm apart from competitors. Realization rates are fairly similar across firm sizes and practice areas, which suggests that reputation, specialized expertise, and operational efficiency are becoming more critical. At the same time, economic uncertainty is making clients more cost-conscious, prompting them to explore lower-cost providers or alternative fee arrangements. For US law firms, these trends present both a golden opportunity to capitalize on demand and a challenge to maintain pricing power in a shifting market.

• The American Bar Association (ABA) is getting pushback from accredited law schools for its plan to double the amount of hands-on legal credits students need to graduate. Under the proposal, scheduled for implementation no later than 2032, students will have to take 12 credits (up from the current six) of course work that aims to create real legal work in order to graduate more trial-ready attorneys. The credits can take the form of clinics, externships, simulation courses, or courses that include some element of hands-on legal work. Critics of the proposal say it would be too costly for schools and students, especially those who work part time or have day jobs. Some law school administrators also question the entire premise of the expansion, saying the ABA has not provided enough evidence that the extended credits actually benefit students and that the association is micromanaging curriculum.
• Revenue for the legal services industry grew by 8% in the fourth quarter of 2024, per the US Census Bureau, in an industry that is in high demand due to complicated regulatory requirements and a boom in companies looking for cyber security and data privacy legal services. Other emerging practice areas ripe for growth include healthcare law, intellectual property, and environmental and scientific compliance. Also fueling revenue growth is a 9% jump in billing rates in 2024, per the American Bar Association, with the need for specialized legal expertise in emerging areas driving the cost increases. These issues have all combined into a robust market for legal services, which have pushed the industry to near-record profitability. This does, however, add pressure to law firms in that they will need to almost double profit growth consistently to counter rising operational costs and still meet market demand.