Microsoft (MSFT - Get Report) gave investors plenty to cheer about in its latest earnings report -- with one small exception.

Driven largely by robust growth in its cloud computing segment, shares of the tech giant hit at an all-time high of $140.67 on Friday after it beat expectations on both earnings and revenue. Its stock is up 35% so far this year, pushing Microsoft's valuation past $1.06 trillion on Friday.

Gaming revenues declined, however. Driven by lower consoles and monetization across third-party gaming titles, Microsoft reported 10% lower revenue in Gaming. And Microsoft forecast that gaming revenue will be "down slightly" in its full-year results.

Investors likely aren't too troubled by this weak spot. Microsoft's Xbox consoles are at the tail end of the product cycle, with new models due out next year. And on an investor call, CEO Satya Nadella talked up Microsoft's broad-based position in the fast-growing gaming market, with a business model that includes services like Xbox Live and Game Pass in addition to console sales.

"I feel we are well-positioned to what is going to be a much larger market than what was traditionally gaming, in spite of all the success we've had over the years in Gaming," he said.

When it comes to Microsoft's gaming results, there's the other elephant in the room: Fortnite, the wildly popular multiplayer game, or the "third-party title" referred to in Microsoft's earnings releases, that burst onto the scene a couple of years ago. In the year-ago quarter, the success of Fortnite helped to lift Microsoft's gaming revenue by 39% -- setting Microsoft up for a tough act to follow this quarter. 

Still, it serves as a good reminder that even for a gaming powerhouse like Microsoft, predictable growth in that segment can still be somewhat fickle. 

In a recent note for example, Jeffries analyst John DiFucci struck a more contrarian tone on Microsoft than the majority of Wall Street analysts these days. In it, he noted that its Xbox Software and Other segment "can be very volatile given the sudden success of games like Fortnite," and argued that margins in Microsoft's Azure segment will never match that of Amazon's (AMZN - Get Report) AWS in making the case that shares are "materially overvalued." 

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