Law Firm Revenues Soar as Billing Rates Hit Records, But AI Costs Pile Up

Billing rates at major US law firms keep climbing, driving double-digit revenue gains in the first half of 2025, new survey data shows.

The rate hikes are helping firms absorb mounting expenses, consultants said, as they boost lawyer pay while also adopting costly artificial intelligence tools that may one day replace much attorney work.

Spending on generative AI and other technology pushed up overhead costs -- excluding lawyer compensation -- by 8.6% in the first half of 2025, according to data released Tuesday by Wells Fargo’s Legal Specialty Group. For now, however, AI has not advanced enough to replace lawyers at scale. “In the meantime, you have both the associates and the AI, and there aren’t any expense savings right now, it’s just expenses,” said Owen Burman, managing director at Wells Fargo.

 

Across more than 130 firms surveyed, average revenues rose 11.3% and profits per equity partner jumped 13.7% in the first half, fueled by a 9.2% increase in billing rates. “It’s very strong growth, and rates are a huge part of it,” Burman said.

 

Top partners at Milbank, Quinn Emanuel, and Susman Godfrey have now crossed the $3,000-per-hour threshold. Milbank’s Neal Katyal, a former acting US solicitor general under Barack Obama, is billing $3,250 an hour.

 

The rate escalation, Burman added, is necessary to cover expense growth. Wells Fargo’s survey found attorney and staff pay hikes helped push up total expenses by 9.5% in the same period. Rising occupancy costs and liability insurance premiums also weigh on firms, said Kristin Stark of Fairfax Associates: “Expenses are up across the board.”

 

Generative AI remains a “looming unknown,” said Bruce MacEwen of consultancy Adam Smith Esq. The technology could force firms to shift away from the billable-hour model. “If AI can draft a 15-page motion in five minutes, the current model doesn’t make sense,” he said. But Peter Zeughauser, another law firm consultant, cautioned that earlier innovations such as e-discovery were also expected to trigger value-based billing -- and never did.

 

Meanwhile, demand for human lawyers is strong. Law school applicants are up 18% year-over-year, according to the Law School Admission Council, and the latest graduating class posted a record 93.4% employment rate within 10 months, the National Association for Law Placement said.

 

Other Legal Industry Updates:

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• Air Force Nominee: Wiley Rein partner William Lane III disclosed $1.12 million in law firm pay as part of his nomination to serve as Air Force general counsel. His past clients included Amazon, Boeing, and the US Chamber of Commerce.

• Schnader Harrison Fallout: Defunct firm Schnader Harrison Segal & Lewis faces a $5.4 million lawsuit from its former New York landlord for unpaid rent. Earlier this month, it agreed to pay $675,000 to settle pension misuse claims.

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