The tech giant said it reached the milestone last week. It made the announcement at an employee meeting on Wednesday, a day after it handed down quarterly results showing demand for its key product is waning.

First released in 2007, iPhones have become the dominant source of revenue for Apple and transformed it into the world's most valuable company.

But the smartphone's importance appears to be slipping.

iPhones made up 56 per cent of Apple's $US42.4 billion ($A56.3 billion) sales in the three months to June, down from 63 per cent on a year earlier.

Apple sold 40.4 million iPhones in the latest quarter, a fall of 15 per cent from the June quarter last year, but slightly better than analysts had feared.

Apple's total revenue has declined 15 per cent worldwide over the past year, with the biggest fall in sales happening in China.

A year ago China was a bigger market for Apple than Europe, but sales since have tumbled by a third to $US8.8 billion, while European sales have fallen only 7 per cent to $US9.6 billion.  

Services grow, not gadgets

Amid the stagnating product sales, Apple has been eager to point to growing revenue from Apple Music, the App Store, its mobile payments system Apple Pay and its storage centre iCloud.

Sales from those digital services grew 19 per cent over the past year and 33 per cent over the past two years to $5.9 billion, making them a bigger business now than Apple's iPads or Mac computers.

Those figures suggest the future of the tech giant could more about digital infrastructure than the devices we use.

The iPhone's shrinking importance did nothing to stop Apple's chief executive Tim Cook gushing when he announced the phone's billion-milestone on Wednesday.

"iPhone has become one of the most important, world-changing and successful products in history," Mr Cook said.

"Thank you to everyone at Apple for helping change the world every day."