be in the range of $157 million to $177 million, with performance improving in the second half. Investments in CapEx, excluding development costs, are expected to be 2% of revenue for 2026. With that, I will turn the call back over to Iric for closing remarks before Q&A.
Thank you, Tom. As we conclude, I want to emphasize that while our second quarter revenue reflected choppiness in product orders and repair intake, the underlying fundamentals of our business remain strong. We delivered year-over-year expansion in adjusted EBITDA margins, maintained disciplined cost execution, and continued to generate healthy commercial activity across our markets. Importantly, order momentum for digital technology upgrades remained robust during the quarter, reinforcing our confidence in the demand environment and providing further support for future revenue growth. This performance reflects both the strength of our customer relationships and the value customers place on our technology and service offerings.
The offshore drilling market continues to evolve favorably.
Slower contracting activities improving, customers securing longer-duration awards, and many of the rigs winning work today are equipped with HMH technologies. At the same time, operators remain focused on enhancing operational performance through equipment upgrades, automation, digital solutions, and next-generation technologies. All areas where HMH is uniquely positioned to create value. Looking ahead, we remain confident in anticipated market acceleration through the second half of the year and into 2027 and in HMH's ability to capitalize on opportunities front of us. Finally, I want to thank our employees around the world for their dedication and outstanding execution this quarter. Their commitment to our customers and our strategy continues to strengthen the foundation of HMH and position the company for success in the years ahead. Thank you for your continued support of HMH. We look forward to updating you on our progress next quarter. With that, I turn the call back to the operators for questions.
Operator
Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.
If you are muted locally, please remember to unmute your device. please stand by while we compile the q a roster your first question comes from derek polisher with piper sandler please go ahead hey good morning guys um i wanted to start with the comment tom you made in your in your remarks about the visibility that you have for your 27 florida rigors you said 80 percent up from 65 this time last year obviously a great improvement there so maybe just help us understand closing that 20 gap and even if you could talk about the upside and downside scenarios for meeting those 2027 rig year estimates.
Yeah, it's just there's a lot of noise, obviously, you know, still in some of the, you know, the tail end of that, whether you've got rigs that may be rolling off contract, need to be recontracted, potential for reactivation. So I'd say, you know, again, if you look at the rig activity forecast and you re-forecast it, you know, from six months ago to today, you'd be at the same levels in terms of forecast, more certainty around it. and there is both upside and downside i'd say you're starting to narrow the gap on on the downside um just just by seeing the contract announcements that we've had so we don't go rig by rig but it's just trying to give comfort that that what we see today is exactly what we expected to see and you know we expect to see further strengthening throughout the year and again kind of comparing it to past cycles we're ahead of where we'd be when looking at the forecast Let me add to that.
Let me add that for the first seven months in 26, contracted rig years was 50% higher than the same period in 25.
That also gave an indication that 27 is up. right okay no that makes sense that's helpful and then so obviously it sounds like you're expecting an order order inflection here in the back half of the year obviously revenue came in a little bit light you're expecting the inflection second half into 2027 sounds like your customers uh had some delays just given the the current geopolitical events maybe could you talk to us about your conversations with your customers what they're waiting for any specific clearing event is Is it just they need a resolution in the Middle East to kind of get back to things? Maybe just a little bit more color around the guidepost that we should be looking out for to then see that inflection that that has.
Yeah, let me separate that into two. I'm glad you asked about the Middle East. So I think when you look at the Middle East, this is not true in the previous quarter. In this quarter, you had specific installation commissioning delays and order delays related to the situation that's obviously persisted longer than we thought. That in and of itself was about a $10 million revenue headwind in the quarter. So that was, you know, that is sort of a discrete item, although it does affect some purchasing elsewhere. What you did see, as Eric alluded to, is an acceleration of digital. So you had significantly higher digital orders than we saw. So we saw customers, you know, making those longer-term decisions, you know, the way we would expect them to, and even a little bit ahead of what we'd expect them to, where you've got a little bit of delay is on some of the spend on repair in advance either of reactivations or, you know, knowing a rig is going on contract and just waiting a little bit longer to spend the money. And by the way, on the reactivations, that's not respected on a reactivation, you know, one without saying the name, you know, you've got, you know, 50 POs on a reactivation that you're updating on a weekly or monthly basis. So, I mean, like it's been kind of like that. And historically, you've seen some of that spend occur ahead of contract you're not seeing that and even when they have contracts you're seeing a little bit of a delay in terms of when that picks up.
Yeah I think you mentioned it yourself geopolitics situation that actually drives the the drillers to be a little bit more cautious about when they actually do the the work on the upgrade they are planning to do so they wait as long as they can.
Operator
Great thank you Eric and Tom I'll turn it back.
Operator
Your next question comes from Jason Kim with J.P. Morgan. Please go ahead.
Good morning. Good morning, Eric and Tom. Thank you for taking my question this morning. So, Tom, you just mentioned customers are making some of these longer-term digital decisions even a bit ahead of your expectations while some shorter cycle repair spend is being deferred. As that digital and automation mix grows within the services segment, how should we think about its contribution to margins and the stickiness of that revenue over the life of these longer contracts?
Yeah, it's kind of a two-part. You know, there's – a lot of what that allows us to do is actually plan. So it's actually nice that it's happened because it allows for better operational planning. Margin profile is similar. I mean, I think it's, you know, it's an aftermarket margin profile, and so what you'd expect. There is a little bit, you know, if you take, you know, that six – and there's more on the back end of that, we believe. But some of that is just spent around the upgrade itself, and then some of it is an annuity beyond that. So it's a little bit of a mix.
Got it. That's helpful. And as a follow-up to that, on the roughly $10 million Middle Eastern headwind you've flagged, as those installation and commissioning activities resume, do you view that as largely recoverable revenue that shifts into the back half in 27, or are you already seeing those delayed activities begin to unlock?
I split that into two. I mean, first of all, yes, it's all recoverable. So, every bit of that, you know, we think, yeah, will be recovered. I think in terms of the installation commissioning, yes, I think you see that, you know, as soon as the situation kind of resolves itself. There's equipment, both our equipment and equipment, you know, that's needed for some of the insulation commissioning that's literally stuck on ships right now, as you would expect. On the new orders, I think we see, you know, without getting as focused on the customers, an acceleration of discussions. But just like I need to wait on this. I have to rebuild infrastructure. And so you have the order delays could extend further than this year would be my belief.
Operator
Your next question comes from Stephen Gingaro with Stiefel. Please go ahead.
Good morning, Stephen. Stephen, you're breaking up a little bit. Sorry, you're breaking up a little bit.
Should I want to dial back in?
I think that'd be helpful. We're having trouble hearing you. We'll wait for patient. We don't know if he's coming back on or not. Let's give him a minute. He was trying to call back in. Guys, I think I'll turn it back over to Eric.
Steven, we'll catch up with Steven offline. Eric, do you want to go ahead and wrap?
Yeah, okay. Thank you for your support and participation on today's call, and we're looking forward to updating you on the third quarter results when that comes.
Operator
This concludes today's call. Thank you for attending. You may now disconnect.
