US law firms performed strongly in 2024, with growth driven by transactional practices and more pronounced at the top of the market, according to a new report by Wells Fargo. 

Revenue rose 12.5% in 2024 for all firms reporting in Wells Fargo’s Legal Specialty Group year-end survey, up from 6% last year and reaching growth rates only surpassed in 2021 (14%).

Revenue growth was strongest for the Am Law 1-50 – up 13.9% – while firms in the Am Law Second Fifty and Am Law Second Hundred trailed, albeit with solid growth of 9.6% and 9.9% respectively.

The superior performance of the Am Law 50 firms surveyed in the report was evident across almost every metric measured, from billing rate growth to increasing profits per equity partner (PEP). 

Robert Bata, founder and principal of consultancy WarwickPlace Legal said: “Larger firms not only have greater resources for recruitment, investment in artificial intelligence and market share acquisition, but also possess, to a significant degree, global or at least international reach, enabling them to serve their clients in a variety of jurisdictions around the world. 

“That doesn’t mean that highly-specialised boutiques cannot be as profitable as some of the top 50, but generally that is not the case. This is why we have been seeing such a great consolidation trend in the US – the need to get to a critical mass for revenue, profitability and diversified market entry.”

Billing rate growth continued to be the primary contributor to revenue growth, the report found, with average standard rates rising 9.1% year-over-year, up from the 8.3% increase in 2023. At 10%, standard rate growth was considerably higher for the Am Law 1-50 than for the other tiers – 7% for the Second Fifty and 6% for the Second Hundred.

Demand increased 3.5% for the year, up from 0.7% in 2023, with the Am Law 1-50 again showing the most growth, up 3.9%, with the Second Fifty and Second Hundred trailing with growth of 3.5% and 2.3%, respectively. 

With lawyer count up 1.7%, productivity improved by 1.9% to 1,576 hours per lawyer. Most of the improvement occurred among the Am Law 1-50, which was also the segment showing the least growth in lawyer count – up 1.2% compared to growth of more than 2% for the other segments.  

Inventory grew 11.1% overall, led by the Am Law 1-50, where it was up 12.1%, followed by the Second Fifty (9.6%) and the Second Hundred (5.8%). With inventory growing more slowly than revenue, the inventory collection cycle improved by nearly two days, meaning 2024 marked the first year of improvement following two years of lengthening collection cycles. 

The faster collections cycle likely reflects the shift in practice mix toward transactional practices, especially for the largest firms, the report noted, while firms have generally benefited from more experience with electronic billing and perhaps more discipline in negotiating payment terms in client engagements.

Total expenses grew 9% in 2024, up from 6% in 2023, representing an acceleration from the 7.2% increase experienced through the first nine months of the year, likely reflecting higher associate bonuses and more year-end expense prepayments compared to 2023.  

Overall net income increased 17.2%, ranging from a high of 19% for the Am Law 1-50 to a low of 12.2% for the Second Fifty and 13.7% for the Second Hundred. 

Tight control of equity partnership numbers, which increased by just 0.3%, led to a PEP increase of 16.9%, ranging from 18.9% for the Am Law 1-50 to 12.4% for the Second Fifty and 12.3% for the Second Hundred.