Considering that FireEye (NASDAQ:FEYE) stock is up 27% this year, investors clearly like what they're seeing from the cybersecurity company. However, for those less familiar with the FireEye story,  last quarter's meager 3% increase in revenue to $173.7 million and it ongoing losses might not, at first glance, inspire a great deal of confidence.

Investors who have been following FireEye know that last quarter actually constituted a major step in the right direction, on several fronts. But the company is in the midst of a significant transition, with a CEO who has been at the helm for little more than a year, and suffers from waning top-line growth, all of which puts FireEye's stock in a precarious position. The slightest hiccup in one or more key areas could send its share price reeling.

Drawing of FireEye's 360 degree security platform.

Image source. FireEye.

It starts at the top

It was last June that FireEye made the tough, but necessary,  decision to promote now-CEO Kevin Mandia. From the get-go, he began shaking things up -- cutting jobs, vowing to pare overhead, and transforming FireEye's business model. A year in, and Mandia is delivering as promised.

Any fresh change in FireEye's chain of command would be a major blow. It may sound far-fetched, but the results Mandia has achieved in  a relatively short time can't have gone unnoticed by FireEye's peers, both large and small. Even a rumor of a management change would be enough to cause FireEye's stock to fall.

Building a solid foundation

One of Mandia's first orders of business was to shift the company away from a product-sales model and toward cloud software subscriptions to drive recurring revenue. The objective is to establish a long-term, reliable source of growth. It's working: Though total sales grew just 3% last quarter,  subscription and services revenue jumped 12% to $150 million.

FireEye hopes to follow the lead of the largest pure-play cybersecurity firm on the market -- Check Point Software (NASDAQ:CHKP) -- and build  a sustainable revenue foundation in the cloud. Check Point's sales grew 8% last quarter, but its software subscriptions soared 27% to $112 million. Toss in software updates and maintenance, and a jaw-dropping $309.1 million of Check Point's $435.5 million in sales were recurring. FireEye isn't Check Point yet, but it's making significant progress down that path that needs to continue, or things could take a turn for the worse.

Stay lean and mean

One of the most impressive numbers from FireEye's first quarter was the drop in operating expenses. Management didn't just talk a good game when it said cutting overhead was a priority: They delivered. Operating expenses of $180.8 million in the first quarter were 29% lower than in Q1 2016, which was a primary reason investors overlooked FireEye's relatively flat top line.

The fear is that rampant cost-cutting will negatively impact growth, which would almost certainly cause FireEye's stock to fall. Why? Because to an extent, continued improvements of efficiency are already factored into FireEye's valuation, especially given its tepid revenue growth.

Climb aboard

FireEye shareholders have been enjoying positive momentum -- and they continue to -- but momentum can be an ephemeral thing for any stock. In this case, the optimism is warranted, but the market's feelings about a stock can change in a heartbeat, sometimes for no logical-seeming reason.

And stock price shifts driven by momentum -- positive or negative -- tend to be short-lived. Eventually, FireEye will need to show investors the money, and it's making strides with each passing quarter to do just that.

Hitting the mark

In addition to the strides FireEye took last quarter, another factor propelling its stock price run was that it beat analysts' estimates, and its own forecasts.

FireEye's guidance is for between $173 million to $179 million in revenue this quarter. The low end of that range would be amount to a 1% decline from Q2 2016's $175 million. Double-digit revenue growth isn't necessary nor expected, but delivering revenue that is flat year over year, or even a slightly higher -- as FireEye did last quarter -- should keep the ball rolling.

Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Check Point Software Technologies. The Motley Fool recommends FireEye. The Motley Fool has a disclosure policy.