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What happened

Shares of LED maker Cree, Inc. (WOLF -10.26%) jumped as much as 15.4% on Wednesday after the company reported fiscal second-quarter earnings results. At 12:55 p.m. EST shares had slipped to a 6.7% gain on the day.

So what

Quarterly revenue fell 8% to $401 million in the second quarter, although it was an increase of 8% sequentially. Net income fell from $13 million a year ago to $6 million, or $0.06 per share.

When discontinued operations are removed, revenue was $347 million and topped analysts' expectation for $325 million in revenue. And adjusted for one-time items, the company earned $0.20 per share, beating estimates by $0.04.

On the guidance side, results weren't quite as positive. Continuing operation revenue is expected to be $285 million to $325 million next quarter, compared to an expectation of $320.4 million from Wall Street. And earnings are expected to be between $0.01 and $0.09 per share, versus the $0.07 analysts are expecting.

Now what

While quarterly results topped expectations, they're still showing a decline in the business. And that's troubling long term because Cree can't seem to grow volume enough to offset declining LED prices. And with shares trading at 49 times next fiscal year's earnings estimate, the stock is expensive relative to the company's performance. An earnings beat may be exciting investors on Wednesday, but the excitement may not last if Cree can't begin growing on the top and bottom lines.