U.S. law firms are heading toward another strong year as rising client demand and steep increases in billing rates boost their financial performance.
Lawyer hours worked climbed 3% in the second quarter of 2026 from a year earlier, while billing rates jumped 7.1%, according to the latest Law Firm Financial Index from the Thomson Reuters Institute. The figures point to continued strength across the legal sector after two profitable years.
If demand maintains its current pace through the rest of the year, law firms could record their strongest performance since 2021, when firms benefited from a wave of work that had been delayed during the COVID-19 pandemic.
The latest growth comes on top of robust results in 2024 and 2025, suggesting the industry is not merely recovering from a slowdown but continuing to operate at elevated levels.
Real estate practices posted the biggest increase in demand during the quarter, rising 3.6%. Corporate legal work followed with a 3.5% gain, while labor and employment matters increased 3.4%. Litigation demand grew 3%, and intellectual property work rose 2.8%.
The workload, however, is shifting among different levels of lawyers.
Demand for work handled by associates increased 4.3% during the quarter, while work involving non-equity partners rose 6%. At the same time, demand for equity partners fell 1.2% compared with the previous year.
The figures are based on financial data from 195 large and midsized U.S. law firms, tracking indicators including demand, productivity, billing rates and expenses.
Higher rates remain one of the biggest drivers of revenue. Billing rates have continued their steady climb since 2021, with the latest 7.1% annual increase marking a level of growth that would have been difficult to imagine before the recent period of aggressive rate increases.
Still, firms are facing a significant counterweight: rising costs.
Direct expenses increased 8.3% from a year earlier, while overhead costs rose 7.7%. Technology was among the fastest-growing expense categories, with spending up 11.6%.
That means the industry’s strong top-line performance is not translating automatically into higher profits. Firms are earning more from greater demand and higher rates, but they are also paying considerably more to keep their operations running.
For now, however, the balance remains favorable. With demand continuing to expand and clients accepting higher fees, U.S. law firms appear positioned for another year of strong financial results.
