Citi Hildebrandt Client Advisory Reports Expected Strong End to 2025 and Optimism for 2026 for Law Firm Industry
Key Takeaways
- 2026 demand expected to be driven by continued activity across range of practice areas and accelerated growth in broad M&A
- Law firms remain adaptable amid market volatility and Generative AI implementation
- New York and London remain the top markets for law firm expansion
- Expense growth will be driven by increased headcount with a shift to a more senior leverage model and operating expense pressure
- Law firms will continue investing in Generative AI into 2026
Citi Global Wealth at Work and Hildebrandt Consulting today released the 2026 Citi Hildebrandt Client Advisory. The Client Advisory covers the broad landscape for the legal industry, including how law firms are responding to market challenges and opportunities for growth in the year ahead.
The results show that demand gained momentum throughout 2025, following unanticipated challenges early in the year. Revenue grew 11.3% driven by the collection of strong inventory entering the year and 1.9% demand growth.
The collection cycle lengthened by 1.2%, revising the shortening previously reported in 2024. The report highlights that inventory was up 12.7% by the end of September, driven by 9.6% growth in accounts receivable and a 15.7% growth in unbilled time. These levels are a positive signal for strong fourth quarter collections.
Based on the Report, New York remains the most important market for law firm expansion, with London firmly positioned second. While China and other parts of Western Europe remain more challenging markets, there was a noticeable shift in sentiment towards investing in the Middle East with several large firms anticipating growth in the region.
Headcount grew 2.9%, driven by salaried lawyers. This investment in salaried lawyers was a prime factor in 9.1% expense growth at firms through the first nine months of 2025. There is also a continued shift to a more senior and expensive leverage model, with many law firms investing in more income partners. The results show a 6% growth of income partners. The investment in headcount has outpaced demand growth, resulting in a productivity decline of 0.6%. It is expected that firms will continue to shift to a more senior leverage model in 2026 and beyond.
Results also indicated operating expense pressure which is expected to continue in 2026. There will be continued investment into technology, including cloud computing and cyber security with a greater focus on the impact and implementation of generative AI. Firms will also continue upskilling the professional staff leverage model. Firms are also poised to spend more on office space.
"I feel optimistic about where the law firm industry is headed, especially given the demand and revenue growth we have seen over the past year. We expect transactional practices to keep gaining momentum as the market becomes more stable. Generative Al will continue to reshape how firms operate and scale while they also consider ways technology can increase efficiency. I am confident that 2026 will be marked by steady growth, innovation and increasingly sophisticated ways of working," said Gretta Rusanow, Head of Advisory Services for the Law Firm Group at Citi Wealth
Law firms maintain resilience and adaptability in volatile markets. In 2026, there is an anticipation for broader market consolidation, with the most profitable firms continuing to pursue a strong growth mindset, capturing a greater share of market. Generative AI and its impact and implementation on the industry at large will continue to be a strong focus.
"The industry has shown remarkable resilience, and we are seeing that translate into renewed confidence across practices. The increased emphasis on operational efficiency through the use of technology and implementation of Generative AI tools optimizing their core businesses, talent development and strategic growth are positioning firms for sustained success into 2026," said Brad Hildebrandt, Chairman of Hildebrandt Consulting.
About the Citi Hildebrandt Client Advisory
Analyses and projections are based on data collected from a sampling of primarily US-headquartered law firms by the Law Firm Group, as well as conversations with law firm leaders. Sources include the "Citi Annual Survey Database" of 200 US- and UK-headquartered law firms, including 43 Am Law 1-50 firms, 37 Am Law 51-100 firms, 55 Am Law Second Hundred firms, and 65 additional firms; 188 firms from the "Citi 9mo'24 Flash Survey," including 42 Am Law 1-50 firms, 38 Am Law 51-100 firms, 54 Am Law Second Hundred firms and 54 additional firms; the "Citi Law Firm Leaders Survey" of 57 large firms headquartered in the US, UK, China and India; and the "Law Firm Leaders Confidence Index" which reports the forward-looking opinions of law firm leaders from 136 firms. Percentages used in the Figures may not add exactly to 100% due to rounding.
This report is for informational purposes only based on those responses from the survey and are not intended to represent investment advice.
The views expressed herein are those of the participants and do not necessarily reflect the views of Citigroup Inc., Citigroup Global Markets Inc., and its affiliates.
The full Client Advisory can be accessed here.
About Citi
Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States. Citi does business in more than 180 countries and jurisdictions, providing corporations, governments, investors, institutions and individuals with a broad range of financial products and services.
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About Hildebrandt Consulting
Hildebrandt Consulting is continuing its long and distinguished history as the preeminent global consulting firm in the legal profession. With clients in over 15 countries, Hildebrandt has built up unmatched expertise in every aspect of professional firm management. Our reputation for helping firms arrive at strategic solutions comes from our knowledge of the interdependent elements that contribute to overall business performance.
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