Midsize Law Firms Lag in Rate Hikes and Tech Spending in Early 2026
Midsize law firms raised worked rates 5.3% in Q1 2026, trailing large firms' 9.8% increase.
Why it matters: Understanding these rate and investment gaps helps legal professionals anticipate billing challenges and resource constraints impacting client delivery and competitive strategy.
- Midsize firms increased worked rates by 5.3% in Q1 2026, while Am Law 100 firms raised rates by 9.8%.
- Technology and knowledge management spending at midsize firms rose by 6.2%, the smallest increase among firm sizes.
- Only 38% of attorneys’ working hours were billable in 2025, averaging about 3 billable hours per 8-hour day.
- Large U.S. law firms saw 12.4% revenue growth and 4.8% demand increase in early 2026, linked to strategic workload and tech investments.
Law firms are navigating a changing economic landscape by adjusting rates, workloads, and technology budgets, affecting daily legal practice and long-term competitiveness.
In Q1 2026, midsize firms increased their worked rates—the billable hourly rates attorneys charge clients—by 5.3%. This contrasts with a 9.8% rise at large Am Law 100 firms, highlighting a growing pricing power gap, according to a Thomson Reuters analysis.
At the same time, midsize firms increased spending on technology and knowledge management (KM)—tools and systems that capture and share internal expertise—by 6.2%, the smallest growth among all firm sizes. An industry CIO noted smaller firms struggle to maintain effective KM programs due to limited budgets and competing IT priorities, which can hamper efficiency gains and internal lawyer training.
Attorney utilization remained low in 2025, with lawyers billing only 38% of their working hours (about 3 billable hours in a standard 8-hour workday). A report from Innvesti Consulting attributes this to inefficiencies in traditional matter economics, leaving firms with significant unbilled capacity.
Meanwhile, large U.S. law firms reported strong performance in early 2026, with 12.4% revenue growth and 4.8% demand increase. The Economics of Law briefing links this to deliberate workload strategies and targeted tech investments enhancing productivity and client value.
For midsize firms, slower rate increases and constrained tech budgets combined with low utilization rates could erode profitability. These dynamics pressure firms to rethink how they manage workloads and upskill attorneys, impacting service delivery and competitive positioning.
By the numbers:
- 5.3% — worked rate increase by midsize firms in Q1 2026
- 9.8% — worked rate increase by Am Law 100 firms in Q1 2026
- 38% — attorney hours billed in 2025, about 3 billable hours per 8-hour day
- 12.4% — revenue growth for large U.S. law firms in first half of 2026
Yes, but: While data shows midsize firms lag in rate and tech spending growth, some firms may offset this by focusing on niche practice areas or alternative billing models not captured here.
What's next: Watch for further rate and tech investment trends as Q2 2026 data becomes available, alongside firm responses to utilization challenges.