Solar stalwart SunPower announced its third-quarter earnings today, which by all accounts appear to have beaten market expectations.

The company, which manufactures and installs solar systems, reported revenues of $551 million, up 18 percent from the $465 million in revenue reported in the third quarter of last year. Overall, the company’s profits are up. SunPower reported a net income of $20.1 million this quarter, compared to $19.5 million for same time last year, an overall increase in profits of 3.1 percent.

But its operating expenses have doubled since last year, growing from $54 million to $104 million. The company reported GAAP gross margin was 20.4 percent, down from 21.5 percent last year.

SunPower also lowered its fourth-quarter earnings target to $0.95 – $1.15 per share. According to Dow Jones newswires, the company is also under criticism for missing the boat in the second quarter, when critics say it should have capitalized on a burst in demand for solar.

The company earned 21 cents per share in profit this quarter, compared to a loss of seven cents per share the previous quarter and roughly on par with the 20 cents per share it earned in the same quarter last year. (The company’s non-GAAP earnings amounted to 26 cents per share).

A key metric analysts were looking for was 13 cents per share, according to Reuters, which SunPower easily beat. The company derives the majority of its revenue from residential and commercial markets, but it looks like the difference between the company’s residential and utility sales is narrowing —  53 percent of revenue came from residential/commercial this quarter, compared to 58 percent in the third quarter of last year. Also good news on that front — demand is outpacing supply in both cases, SunPower CEO Tom Werner said in a company statement.

The company also highlighted a few benchmarks. It was selected for the biggest rooftop solar installation in the U.S., a 3.5-megawatt project atop a Macy’s in Arizona, sold 28 megawatts in Italian power plants, and ramped up its dealer presence in the U.S., France and Italy. It also installed a new quarterly record of 70 megawatts. The company also repaid $143 million in convertible debentures.

SunPower expects to reach its cost goal of $1.08 per watt by the fourth quarter of 2011 — which will inch it ever-closer to the much-vaunted, much-discussed industry holy grail of manufacturing efficiency of $1 per watt.

“Our third-quarter results reflect the continued success of our vertically integrated model and position us well to meet our 2010 financial goals,” said CEO Werner in a statement.

Overall, the outlook for solar in 2010 is good, and it appears SunPower is riding that wave. Research firm iSuppli recently increased its forecast for the year, saying worldwide installations for 2010 will reach 15.8 gigawatts, more than double the 7.2 gigawatts installed last year. For 2011, installations will hit 19.3 gigawatts. The growth is largely driven by strength in the European market, particularly Germany, which grants generous subsidies for solar projects.