The firm's new forecast was a small improvement on previous guidance but it marks a swift upturn in its fortunes.
Just last month the company cut its full-year earnings forecast and warned about profit margins.
In 2013 it had to recall its yoga leggings for being too revealing.
The controversy over its yoga kit hurt its image and undermined the company's share price.
Its new forecast for the three months to January was raised up to $695m (Â£477m), from an initial estimate of up to $685m.
Its New York listed shares rose as much as 8.7% on Monday in extended trading after the company announced that it holiday season sales had exceeded expectations.
"We had a very successful holiday season driven by strong execution in stores and online during the key holiday weeks," chief executive Laurent Potdevin said in a statement.
The Vancouver-based company competes with the likes of Nike and Under Armour in the fashion and exercise market, which has grown rapidly thanks to people increasingly wearing their  sportswear outside of the gym.
Shares of yoga wear maker Lululemon Athletica jumped over 8% in after-hours trading after the Canadian firm raised its revenue forecast on strong holiday sales.