“Production Over Potential”
Middle market performance in 2025 reflects a year of stability and incremental improvement following earlier fluctuations. Revenue growth dipped mid‑year but rebounded modestly in Q4, demonstrating resilience despite softer hiring trends. Most companies continued to report year‑over‑year revenue gains, with expectations for future growth trending upward. Average revenue growth figures remain strong across the middle market, with larger companies outperforming smaller peers—those with revenues between $100M and <$1B reporting the highest gains.
Employment growth showed more muted momentum. Hiring levels remain lower than in 2024, and while companies have not undertaken broad workforce reductions, employment growth has slowed. In line with reduced hiring demand, businesses report fewer difficulties finding qualified workers compared to prior years, suggesting improved labor‑market alignment.
Across macroeconomic sentiment, confidence in the global, national, and local economies has mostly flattened in 2025. While global confidence ticked up slightly compared to Q2, national sentiment softened marginally, and local confidence remained stable. Industry‑specific confidence, however, is high—92% of companies report being extremely or very confident in their industry's growth prospects over the next 12 months, with technology firms showing the strongest levels of optimism.
The broader long‑term trend data from the post‑pandemic period (2021 onward) reinforces a picture of consistent improvement. Revenue growth, while variable quarter‑to‑quarter, remains well above pre‑pandemic averages, and companies maintain healthy expectations for future expansion through new products, new markets, and operational improvements.
“Resilient and Disciplined”
Middle market organizations continue to face a blend of economic, operational, and workforce‑related challenges. Inflationary pressures and rising input costs remain among the most prominent concerns. Despite ongoing economic uncertainty—heightened by financial market volatility, profitability pressures, and increased cost of capital—companies are recalibrating from a more cautious investment posture seen in the mid-year results.
Operational and technology‑related challenges are growing in significance. Many companies struggle with adopting and integrating new technologies, addressing cybersecurity risks, and maintaining efficiency amid supply‑chain disruptions. Cybersecurity threats, data privacy concerns, and the complexity of integrating AI or automation tools into legacy systems pose meaningful obstacles.
Workforce and talent challenges persist, though slightly softened from previous waves. Retaining employees, managing rising labor costs, and sustaining productivity and engagement remain critical issues. While hiring challenges have eased, workforce development—including reskilling and upskilling—continues to keep leaders up at night.
Regulatory and competitive pressures add further complexity. Many companies cite competitive intensity—particularly price competition and the threat of new entrants—as a significant challenge. At the same time, regulatory compliance burdens and evolving standards increase operational overhead.
Tariffs and trade policy also continue to contribute to strategic uncertainty, though these concerns have improved from the summer. Companies report experiencing or anticipating increased input costs, supply‑chain delays, and the need to diversify supplier bases. While many view these impacts as manageable, they remain a notable constraint.
“On to the Next Play”
Despite these challenges, the middle market sees substantial opportunities for strategic investment and transformation. Technology and digitization stand out as central priorities. Companies are increasingly directing resources toward AI‑enabled tools, business intelligence systems, digitized operations, and automation of routine financial and operational tasks. Technology implementation and upgrades are among the top operational focus areas for the next 12 months.
Revenue growth, profitability improvement, and customer expansion remain core strategic goals. Businesses are prioritizing investments in customer retention and experience, sales growth and new product or service development. Market expansion, especially into domestic markets, continues to present opportunities, though with more measured enthusiasm compared to previous years.
AI adoption paints a particularly promising picture. Companies anticipate significant benefits in operational efficiency, customer satisfaction, strategic decision‑making and innovation. Though concerns persist regarding data security, integration complexity and ROI, the potential upside is clear.
Additionally, the middle market sees opportunities to enhance resilience, particularly in areas such as risk management, climate‑related preparedness, and supply‑chain optimization. Many companies expect to increase investment in climate resilience over the next five years, driven by extreme weather events and evolving ESG expectations.