Law firms experienced near-record profits in the third quarter of 2024, with profits rising 11.2% compared to the same period last year, according to a new Thomson Reuters Institute analysis of firm financial data.
Higher lawyer productivity, robust billing rates, and modest expense increases point to a highly profitable year for firms, the report found. The Thomson Reuters Institute and Reuters share a parent company.
This year’s strong performance stands in contrast to the slower demand in 2022 and 2023, following the high profits of 2021. The Law Firm Financial Index, which assesses financial data from 195 large and midsized firms across metrics like demand, productivity, billing rates, and expenses, scored 71 in Q3—its second-highest score since its creation over 15 years ago. The highest score of 84 came in Q2 of 2021, when mergers and acquisitions and IPOs spiked during the pandemic recovery before falling off in subsequent years.
The report highlights that 2024’s gains appear more stable, with increased demand spread across various practice areas. Litigation demand rose by 4% from Q3 2023, corporate practices by 2.6%, real estate by 3.7%, labor and employment by 2.9%, and bankruptcy by 1.7%. Intellectual property was the only practice area to see a slight decline, down by less than 1%.
“From a profitability standpoint, 11.2% is an outstanding number,” said William Josten, manager for enterprise legal content at the Thomson Reuters Institute. “For now, it’s absolutely a rosy picture.”
The index also noted that earlier predictions around sustained inflation and a slow economy have not materialized, adding to law firms’ financial strength. The recent election of Donald Trump as U.S. president is expected to further increase legal work in regulation, compliance, antitrust, and energy, as firms anticipate regulatory shifts. “Times of change are generally good for lawyers because people need advice,” Josten observed. “We’re set up for a first quarter in 2025 where a lot is going to change.”
However, the report cautions that waning inflation may limit law firms’ ability to raise billing rates in 2025, which has been a key driver of profitability this year.
