The upsurge was caused by the Three Free Games deal, combined with some key releases in late '96. In Q1 '97 nobody was dumping stock yet, and the Saturn was still thought to be viable. Saturn sales exceeded most people's expectations in Christmas '96 and it got some good press, with people calling it a comeback. This carried it through early '97, but SoA apparently had little interest in maintaining this momentum.
See here:
The choice of games included was also a very shrewd move on Sega's part. All three were well-known names. All three were from 1995 so their time to sell on their own had mostly passed. And all three had accompanying controllers that Sega was selling: the Virtua Stick for VF2, the Stunner gun for Virtua Cop, and the racing wheel for Daytona USA. Bundling these three games with a lot of Saturns likely helped their accessory sales significantly.
What they should've done, IMO, is kept that deal going but changed the games out. For Christmas '97 they could've made NiGHTS one of the three and made the analog controller the normal controller bundled with the system. I guess they weren't interested in selling Saturns