Thanks Dan. I want to start off by thanking our customers, partners and global team for helping us deliver another solid quarter. We had strong performance both financially and operationally. We grew non-GAAP operating income 22% to $998 million and our reporting records for both operating margin and operating margin expansion.
We also generated more than $1 billion in free cash flow in the quarter which grew 40% on a normalized basis. Operationally, trends in our net new active accounts, engagement and TPV remain strong.
Our performance demonstrates the consistent strength of our platform and the scalability of our model.
Revenue in the second quarter increased 12% on both the spot and currency-neutral basis to $4.31 billion. Adjusting for the sale of U.S. receivables to Synchrony revenue growth was approximately 19%. Acquisitions contributed approximately 1.8 points to revenue growth in the quarter.
In addition the effect of the stronger dollar net of hedging was a revenue headwind of $35 million. U.S. revenue grew 7% versus Q2, 2018 and approximately 20% adjusting for the credit receivable sell.
International revenue grew 18%. On a spot basis transaction revenue grew 17% in the quarter. Revenue from other value-added services decline 21% as a result of the receivable sell. On a normalized basis, it grew approximately 30%.
In addition, we recognized $58 million in revenue from Synchrony related to loan servicing and collections.
As planned, Synchrony took over these services at the end of June.
Going forward, we will no longer benefit from the revenue related to these services.
In the second quarter, transaction take rate was 2.25%, compared to Q2 2018, this was a decline of 13 basis points. Strong growth in P2P contributed to approximately half of the decline. Ongoing weakness in eBay's Marketplaces business and pressure from the stronger dollar on a few key cross-border corridors were also responsible for the reduction.
Total take rate in Q2 declined 27 basis points from the prior year. Approximately 60% of this decline was attributable to the credit receivable sell. The same factors that affected transaction take rate also contributed to the decline in our total take rate. Both transaction take rate and total take rate benefited by approximately five basis points from revenue related to our hedge gains.
Volume-based expenses increased 15% in the second quarter to $1.9 billion. Transaction expense was 94 basis points as a rate of TPV improving four basis points from Q2 2018 and two basis points sequentially. The reduction in transaction expense as a rate was primarily due to the timing of the realization of benefits from volume incentives, which were recognized in the third quarter last year.
For the remainder of the year, we expect our transaction expense as a rate of TPV to be in the range of 95 basis points to 98 basis points. Transaction loss was 14 basis points as a rate of TPV, a decline of five basis points from Q2 2018 and four basis points sequentially. This reduction in transaction loss was driven by improvements in our risk management capabilities. Loan losses were four basis points as a rate of TPV in line with recent performance.
Transaction margin dollars grew 9% to $2.4 billion in the second quarter. Transaction margin as a rate was 55%, a decline of approximately 120 basis points versus Q2 2018.
Over the past four quarters, the credit receivable sell has been a meaningful driver of the decline in transaction margin dollar growth.
We expect growth to reaccelerate in the second half of 2019 and be in the range we reported prior to the Synchrony announcement.
Non-transaction-related expenses grew 2% versus last year. Growth in these expenses was affected by both the lapping of held-for-sale accounting changes, which resulted in a lower rate of growth year-over-year, as well as an increase in expenses related to our 2018 acquisitions. Normalizing for both non-transaction related expenses grew 6%.
On this adjusted basis, we delivered 300 basis points of operating leverage with these expenses increasing only $0.11 for every dollar increase in revenue. This is indicative of our sustained ability to grow at a low marginal costs. Across our business, we're pleased with our operating discipline and cost performance.
Our scale continues to afford us leveraged opportunities.
On a non-GAAP basis, operating income in the second quarter grew 22% to $998 million and our operating margin expanded approximately 200 basis points from Q2, 2018. Adjusting for 2018 acquisitions, operating income grew 24% and our operating margin expanded 280 basis points in the quarter.
Other income in the quarter increased by $201 million, primarily due to a $187 million increase in net unrealized gains on strategic investments. On a per share basis, unrealized gains contributed approximately $0.14 after tax. $0.01 of this benefit was included in the EPS guidance we provided in April. The incremental $0.13 was not in our guidance and resulted predominantly from our investments in MercadoLibre and Uber.
Consistent with the plans we discussed on our last earnings call, we disclosed the expected effect of these unrealized gains on our second quarter earnings in our 8-K released on July 9th. Non-GAAP EPS for the second quarter grew 47% to $0.86. Adjusting for unrealized gains of $0.14 this year and $0.02 last year, non-GAAP EPS grew 27% in the quarter.
Our strong EPS results reflect the operational outperformance with solid revenue growth, efficiencies and cost discipline, all contributing in a meaningful way.
We ended the quarter with cash, cash equivalents and investments of $10.7 billion.
In addition, we generated more than $1 billion of free cash flow or approximately $0.24 of free cash flow for every dollar of revenue.
Now I'd like to discuss our updated guidance for 2019 and our guidance for the third quarter.
For the full year 2019, we are raising our earnings outlook and lowering our revenue guidance, which I will speak to in a moment. We now expect non-GAAP earnings per share to grow 29% to 31% and be in the range of $3.12 to $3.17.
Our raised earnings guidance reflects the outperformance of our business in the first half of 2019. It also incorporates the unrealized gains we have recognized from our strategic investment portfolio.
As a reminder, these investments may create earnings volatility as we move through the year. Subsequent to quarter end and prior to the release of our earnings, we plan to continue disclosing the effect of these investments on our results.
We also expect to expand our non-GAAP operating margin by approximately 100 basis points this year, demonstrating our sustained ability to scale our business -- incremental costs.
For the full year, we are lowering our revenue outlook to a range of $17.6 billion to $17.8 billion from our prior range of $17.85 billion to $18.1 billion. This new range reflects growth of 14% to 15% for the year, and adjusting for the sale of receivables 18% to 19% growth.
Since we last provided guidance in April, a few key factors have contributed to revisions to our forecast.
First, as Dan mentioned, we have a few big product integrations with partners that are experiencing delays in part because of their expanded scope.
Second, our previous guidance contemplated the implementation of certain price changes that we are now delaying.
While the timing has shifted out a few quarters, we still expect to realize the full benefits of our partnership and pricing initiatives.
And finally, approximately 20% of our volume is cross-border and affected by changes in foreign exchange rates. We now anticipate that continued strength in the U.S. dollar will have a greater impact on our revenue in the second half of the year than we've previously expected. These changes to our 2019 revenue expectations are primarily related to the timing of initiatives.
Our medium-term outlook for revenue and earnings, as provided in May 2018, has not changed.
For the third quarter, we expect revenue in the range of $4.33 billion to $4.38 billion, or 18% to 19% growth on a currency-neutral basis.
In addition, we expect non-GAAP earnings per share to be in the range of $0.69 to $0.71, representing 20% to 23% growth.
Our third quarter EPS guidance includes an estimated $0.03 benefit from unrealized gains we expect to recognize in the quarter.
In closing, we are pleased with the progress we are making across many fronts.
We are advancing our strategic priorities and at the same time sustainably improving our cost structure. The cash flow generating power of our business continues to give us great flexibility, as we allocate capital with discipline.
We are focused on creating value for our shareholders and strengthening our position as the world's leading digital payments platform for our customers.
With that, I'll turn it over to the operator for questions. Thank you.