Confidence among partners at many professional services firms is deteriorating, our most recent survey finds, suggesting that their firms are entering a more uncertain demand environment without having meaningfully reset cost structures or incentives. Nearly two-thirds are not confident in their firm’s performance over the next 12 months, and compensation outcomes are weakening: 34% report lower compensation than expected—double the share who said the same in 2022. This is especially true of small-cap firms: 49% of partners at firms with annual revenue of $1 billion or less reported lower compensation than expected, compared to only 27% at firms with annual revenue of more than $20 billion.
A key driver of this uncertainty is that AI is rapidly reshaping how work is delivered and how the industry is structured. AI is shifting demand and introducing new competitors. Half of partners report using it frequently in client delivery, driving both efficiency gains and the development of new offerings. However, many firms are still using AI in relatively limited ways, while clients increasingly expect more advanced and integrated capabilities. These gaps in delivery expectations are leading to a shift toward higher-value advisory activities and away from traditional junior leverage. This evolution is beginning to misalign with traditional partner economics, including revenue targets, leverage models, and pay structures.
These structural shifts are now putting pressure on compensation. While compensation has held steady on the surface, it remains concentrated in the $1 million–$2 million range, with limited upward movement, while the use of equity or other non-cash compensation declined (from 66% in 2022 to 55% in 2026). One likely driver is the weaker stock performance of many large public IT firms in recent years, which has reduced the perceived value and attractiveness of non-cash compensation. Firms are increasingly relying on cash compensation to retain talent, which is putting pressure on fixed costs at a time when growth expectations are softening.
Meanwhile, performance expectations remain high—and are becoming more concentrated among a smaller group of partners. 44% of partners carry revenue targets above $10 million, and more tenured partners disproportionately capture the highest levels of compensation. This dynamic is widening the gap between top and mid performers, as well as between longer- and shorter-tenured partners, which may be contributing to elevated turnover: 52% of respondents report higher partner turnover than expected. As partners move firms more frequently, many effectively reset their tenure trajectory, creating potential risks around retention, perceived equity, and long-term succession.
The industry appears to be at a meaningful inflection point, as firms balance strategic investment priorities with the need to retain top partner talent. But emerging technologies such as AI and the growing influence of private equity are creating choppy waters for both partners and firms to navigate.