What happened

Shares of Cray (NASDAQ:CRAY) soared as much as 20.4% higher on Thursday morning, boosted by a strong fourth-quarter report. As of 11:40 a.m. EST, the stock had settled to 13.4% gain.

So what

Fourth-quarter sales came in at $346.6 million, a 30% year-over-year improvement. Adjusted earnings of $1.38 per diluted share represented a 75% jump over the year-ago period.

The revenue tally was in line with analyst projections, while Cray achieved a positive earnings surprise of roughly 12%.

Cray systems being installed in a Seoul data center, part of a single $54 million contract

Image source: Cray.

The strong bottom line was a welcome change from recent quarters, where the supercomputer systems builder saw three straight quarterly losses and missed Wall Street's already gloomy estimates in the last two reports.

Now what

This solid report is hardly the end of Cray's recent troubles. In the earnings release, CEO Peter Ungaro reminded investors that Cray's results are naturally lumpy and unpredictable, and that future quarters may not match this period's impressive order volume and gross margins. A few multimillion-dollar systems slipping from one quarter to another is enough to cause significant changes to Cray's top and bottom lines.

Ungaro's first-quarter guidance, for example, points to just $55 million in expected sales. Hitting that target would work out to a 52% year-over-year revenue decline. Operating costs will hold steady, but gross margin should shrink by a couple of percentage points. And, as the report puts it, "Actual results for any future periods are subject to large fluctuations given the nature of Cray's business."

That's why Cray shares, even after accounting for today's sudden gains, have lost more than 40% of their value over the last 52 weeks. You're watching a turnaround attempt in progress. Investors would be wise to let Cray prove its worth in a few more solid reports. One daisy does not make a full summer flowerbed.

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