On Wednesday, SunPower (NASDAQ:SPWR) charged investors up with continued profitability in its third-quarter results. SunPower, spun off by Cypress Semiconductor (NYSE:CY) late last year, is in the business of selling solar panels. Its ability to generate continued profits is a significant milestone in becoming a market leader in the solar-panel industry.

Revenues for the third quarter were up 198% from Q3 2005 and 19% sequentially from Q2 2006. Operating income swung from a $1.4 million loss in Q3 2005 to a $6.4 million gain and improved 66% sequentially from Q2 2006. Net income also went from a $1.6 million loss in Q3 2005 to a $9.6 million gain, heavily influenced by a $4 million rise in net interest and other income.

With such tremendous growth and increased profitability, times are pretty bright for SunPower. Operations echo the financial results. Management just announced a new generation of solar cells, dubbed Gen 2, which will maintain the company's competitive edge. To meet demand, the company is also expanding both horizontally, with more manufacturing capacity, and vertically, with its new joint venture to produce silicon ingots. Further, new supply contracts with DC Chemical should allay fears of future supply shortages of polysilicon.

But SunPower does have some clouds hanging over its future. Evergreen Solar's (NASDAQ:ESLR) IPO in 2000 and the more recent IPO of SunTech Power Holdings (NYSE:STP) late last year both bring significant competition to the solar-panel market. Even competition in the DIY market has just heated up, now that BP Solar, a wholly owned subsidiary of BP (NYSE:BP), has announced a deal to sell its solar-panel products through Home Depot (NYSE:HD).

Other concerns that could darken future success include SunPower's reliance on its top three customers -- Conergy, Solon AG, and General Electric (NYSE:GE) -- for more than 60% of its business, and Cypress Semiconductor's effective control of the company, by way of 85% ownership of SunPower's stock. These are all risks that must be considered when developing an investment thesis for SunPower. However, the company's ability to generate profits should give investors confidence in its ability to navigate its way through the clouds towards solid market-share leadership.

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Fool contributor Matthew Crews welcomes your feedback -- really! He has no financial position in any of the companies mentioned. The Motley Fool has a disclosure policy.