Baker & McKenzie has lost its position as the world’s top-grossing law firm, despite posting yet another record financial performance in its most recent fiscal year.

Baker’s gross revenues increased 4.6 percent in the fiscal year ended June 30, 2013, to an all-time high of $2.42 billion, the firm announced Wednesday. Nonetheless, after heading The American Lawyer’s Global 100 revenue rankings for the past three years, Baker will place second in the 2013 survey—to be published in the October 2013 issue—to DLA Piper, which saw its revenue increase 8.6 percent last year, to $2.44 billion. (DLA tallies its financials on a calendar-year basis.)

Baker has, however, overtaken DLA to move back to the top of the head count charts, with its total attorney ranks growing 2.3 percent in its most fiscal year, from 4,004 to 4,097. (DLA has 4,036 lawyers.) Despite the increased head count—which included the addition of some 60 lateral partner hires—the firm’s revenue per lawyer rose 1.7 percent, to $590,000.

Baker’s net income, meanwhile, rose 9.1 percent, to $862 million over the same period—another firm record—while its profit margin rose 2 percentage points, to 36 percent. And after slumping to a three-year low of $1.09 million in 2012, Baker’s average profits per equity partner rebounded strongly in 2013, rising 10.1 percent, to $1.2 million.

Baker’s global chairman Eduardo Leite says the firm is pleased with its results given the underlying market conditions. “It’s good growth for these times that are very challenging,” Leite says. “We have continued to expand [our network] and are beginning to see the benefit of our investments in previous years."

Over the past 12 months, that expansion included establishing four new international bases.

The firm launched in Casablanca last July with the hire of Kamal Nasrollah, a former corporate partner at Paris-based August & Debouzy who now heads Baker’s outpost in the Moroccan city. The office serves as a new cornerstone of Baker's Africa strategy in what Leite refers to as its “Africa triangle," which also comprises South Africa, where Baker took over the 31-lawyer Johannesburg practice of the collapsing Dewey & LeBoeuf last May, and the Egyptian city of Cairo, where the firm has had a presence since 1985.

In October, Baker became the first international law firm to launch in Peru by absorbing 90-lawyer Lima-based outfit Estudio Echecopar. More recently, in May, Baker was the latest international entrant to the fast-growing Korea market, which has also attracted the likes of Cleary Gottlieb Steen & Hamilton; Clifford Chance; Simpson Thacher & Bartlett; and Ropes & Gray. Finally, Baker significantly boosted its Middle Eastern presence by securing a tie-up with 40-lawyer United Arab Emirates firm Habib Al Mulla, which formally launched last month. Baker’s international network now encompasses 74 offices in 46 countries.

“Every new office we open creates additional work for all of our existing offices,” Leite adds. “That multiplying effect generates a very strong momentum for growth.”

Leite says Baker will look to continue to expand its international network in line with client demand. The southeast Asian country of Myanmar is one such jurisdiction of interest. Baker recently established a Myanmar desk in its Bangkok office and now employs five Burmese lawyers, although Leite says there are no current plans to establish a permanent base in the country. Leite says Baker is also interested in opening in other African countries, “if political stability and security gets to a reasonable level."

In terms of practice areas, Leite reports particularly strong growth in the regulatory and compliance groups, which he says “continue to be at the very top” of the firm’s various departments in terms of revenue growth. Some of Baker’s traditionally strong noncyclical and countercyclical practices, such as intellectual property, also performed well in the last fiscal year, Leite adds. The firm also saw a rise in M&A and securities work—mainly in Asia Pacific, but also in the United States, with the latter, he says, seeing “only a small uptick, but these days that is very positive."

Standout transactions handled by the firm include advising Carlsberg Group on its $1.2 billion public offer to buy Saint Petersburg–based Baltika Breweries; representing Japanese trading company Toyota Tsusho on its agreement with French brand portfolio giant PPR (now Kering) to expand its automotive business in Africa; and serving as outside counsel to a consortium of Japanese and international banks on the $19.6 billion debt financing of Japanese telecoms group SoftBank Corp.’s $21.6 billion acquisition of a 78 percent interest in Sprint Nextel. (The SoftBank-Sprint deal was recently named Global M&A Deal of the Year: U.S. as part of The American Lawyer’s inaugural Global Legal Awards.)

Leite acknowledges that one challenge still facing the firm is the stagnant market for transactional work in Europe. Indeed, conditions have been “more challenging” on the continent across the board, Leite says, while adding that Baker's London office, which at 370 lawyers is its largest, had done “very well” over the past 12 months. The firm’s offices in North America, he says, have been growing “steadily but slowly” in what Leite says remains a tough market.

“Competition [in North America] is huge and many firms are suffering,” Leite adds. “It’s becoming highly competitive on pricing.”

Leite credits much of Baker’s growth to the firm's ongoing investment in its global key client program, which was established in 2005. The firm has further developed its existing client relation management systems and training schemes, all of which are centrally managed, and has hired a number of nonlawyer professionals to assist on matters such as project management and pricing.

“We lawyers still need to get better at understanding our clients’ needs,” Leite explains. “We started [our program] eight years ago, but it’s only in the last five years that we’ve taken such a focused approach and made significant investments. It’s about delivering an all-round better service.”

Looking ahead, Leite anticipates a broadly flat market for legal services over the next 12 months, before conditions finally start to improve in the second half of 2014.

“There is still patchiness and a lot of stop-and-go,” he says. “The growth markets are not growing at the pace they were before, and while our clients have a desire to improve their positions, they are very cautious, and that reflects in the [lack of] growth of the legal market. Those [law firms] that will grow will do so by gaining market share—either by moving into new markets or by taking the market share of others.”

Leite believes that will equate to revenue growth for Baker in the next fiscal year of between 3 and 5 percent—“no more than that."

“It’s conservative,” he adds, “but those are the signals we’re getting.”