New Axiom study of 510 in-house legal leaders and CFOs finds that bigger budgets are not bringing relief. Legal departments are being squeezed by rising talent costs, ballooning law firm fees, an AI bill nobody budgeted for, and a workload that is outrunning all of it

NEW YORK, Sept. 8, 2026 /PRNewswire/ — Eighty-three percent of in-house legal leaders expect a bigger legal budget in 2027, and none anticipate a significant cut, according to new research from Axiom. Yet only 6% believe the increase will be large enough to create real capacity, and 55% say their workload will still outpace their budgets. Axiom’s study finds that the budget formula legal departments have relied on for decades has hit a breaking point, and that most of next year’s increase is committed before the work is even assigned.

The findings come from the Axiom 2027 In-House Legal Budget Report, a global study of 510 in-house legal and finance leaders across six countries, conducted by InsightDynamo and commissioned by Axiom. Sixty-four percent of respondents represent companies with $1 billion or more in annual revenue. The full report benchmarks budgets by company revenue, team size, and region and gives legal leaders peer data to bring into budget season.

For years, budget math was simple. Workload went up, the budget went up, and you either hired another lawyer or sent the work to a firm,” said Sara Morgan, Chief Legal AI and Talent Officer at Axiom. “That formula is breaking down. Compensation is climbing, firm rates are climbing, and AI mandates arrive without funding. So legal teams cover it from other lines, the gains take longer to land than anyone planned, and the work still has a deadline. The firm gets the call by default, not because it’s the only option. Law firms win either way, and a bigger budget doesn’t break that cycle. It just funds another year of it.”

Other key takeaways from this year’s study:

• AI mandates are typically unfunded. When the business asks legal to implement AI, the funding does not come with it 92% of the time, up from 78% a year ago. Teams absorb the cost by pulling from other line items, usually the existing technology budget, and AI spend grows as adoption spreads across the department.
• AI is raising law firm bills, not lowering them. Fifty-nine percent of legal leaders say their law firms raised fees while positioning AI as a value-add, roughly double last year’s share. Firms pass savings through more often than they did a year ago, but AI is unlikely to curb law firm rates in any material way anytime soon.
• First-year associate rates are a pain point. Outside counsel rates rose for 85% of teams over the past year, and many single out first-year associate pricing as a key reason they are shifting work elsewhere — usually to alternative legal service providers (ALSP).
• Talent costs keep climbing even as hiring gets easier. Fully loaded compensation rose for 83% of in-house teams over the past year and fell for none, yet clear majorities say both recruiting and retention have gotten easier. Teams are paying more for talent in a market that has, by their own account, loosened.

The teams getting out from under this vicious cycle are changing how they deploy their budgets rather than simply asking for more. Run-the-company work that once went to law firms by default is coming back under in-house control, supported by ALSPs, AI tools, and smaller firms. More than six in ten teams increased their ALSP use over the past year, and nearly seven in ten expect to spend more within two years. Cost is not the main factor. Quality, specialized expertise, and integration all rank higher as reasons in-house teams use alternative providers. Price seals the decision, but it isn’t what prompts it.

In most cases, CFOs are the ones pushing. Eighty-three percent of CFOs suggest or actively encourage moving law firm work to alternative providers, and just 2% would rather Legal stick with its established firms. Axiom’s 2026 GC Report found the same trajectory earlier this year, with 80% of in-house legal leaders planning to move significant firm work in-house or to alternative providers within 24 months.

“Legal leaders have long faced pressure on their budgets, but rising workloads, law firm costs, and expectations around technology have made that pressure harder to manage,” said Kirke Weaver, Executive Vice President and General Counsel at Organon. “Companies also ask legal departments to demonstrate clearer value, often without providing meaningful new funding. Legal leaders need credible, flexible ways to maintain quality, manage risk, and make smarter resourcing decisions, so they can turn budget growth into real capacity and impact, rather than simply absorb the higher costs.”

“Flex capacity used to be the thing you reached for when something broke,” said Chase Farmer, Chief Commercial Officer at Axiom. “The legal teams handling today’s pressures most effectively have incorporated it into the operating model instead. They decide at the start of the year what share of the work should be handled by flex resources to maximize budget agility and ensure that they are allocating work strategically rather than reactively.”  

This year’s report also works as a benchmark. Legal budgets average roughly $22.4 million overall, from about $7 million at companies under $1 billion in revenue to $49 million above $5 billion. By team size, departments of 15 lawyers or fewer average $9.5 million, while those of 51 or more average $33 to $34 million.

Along with the report, Axiom is offering a free legal spend consultation, a customized assessment that helps legal departments model the potential cost impact of moving work from traditional law firms to Axiom. As the year closes, the consultation can also help teams identify how Axiom can help support backlogged projects, get a jump-start on 2027 initiatives, or simply create additional capacity to relieve the in-house team during the end-of-year sprint.

“Nobody walks into budget season with a comparison,” Farmer said. “A GC knows exactly what their own department spent last year and has no idea whether that’s high or low for a company of their size. So, what the CFO hears is a bigger number and more money Put the rest of the market on the table, and the meeting changes. You stop arguing over the percentage and start talking about what the work actually costs. And the next question is always the same: what happens if some of this work doesn’t go to the firm? That’s a number you can run before you commit to anything.”

To see how Axiom can help you do more with less, sign up for a consultation: https://www.axiomlaw.com/legal-cost-savings-calculator-demo

The Axiom 2027 In-House Legal Budget Report is available at: https://www.axiomlaw.com/resources/articles/legal-budgeting-survey-report

About Axiom
As the leading alternative legal services provider globally, Axiom Law gives in-house legal teams on-demand access to top legal talent and lawyers — deployed when, where, and how clients need it, for up to 50% less than national law firms.

Axiom’s network of 14,000+ legal professionals includes 4,000+ lawyers with Fortune 500 experience, delivering AI-enabled legal services across more than 12 practice areas: M&A, regulatory compliance, data privacy, labor and employment, technology and AI, and more. Engagements range from legal secondments and complex project support to fully embedded team solutions.

The results speak for themselves. Trusted by 75% of the Fortune 100 and thousands of mid-market leaders, Axiom ranks #1 among Alternative Legal Service Providers in 8 of 9 performance categories — including talent quality, breadth, productivity, and client experience — according to a top 5 global consulting firm. Across more than 3,000 engagements annually in 6 regions and 4 continents, 93% of clients rate Axiom lawyers as good as or better than top law firm attorneys, with 96% client satisfaction and measurable cost savings that reduce outside counsel spend without sacrificing quality.

Stop overpaying for law firm work. Start with Axiom. For more information, visit www.axiomlaw.com.

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SOURCE Axiom