UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)

_X_   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1998

___   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from _____________________ to ________________________

                          Commission file number 0-6620

                             ANAREN MICROWAVE, INC.
             (Exact name of Registrant as specified in its Charter)

              New York                                16-0928561
      (State of incorporation)            (I.R.S Employer Identification No.)

      6635 Kirkville Road                 13057
      East Syracuse, New York             (Zip Code)
      (Address of principal            
      executive offices)               

Registrant's telephone number, including area code:  315-432-8909

                                      N/A
                    (Former name, former address and former
                   fiscal year, if changed since last report)

      Indicate by Check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No __

      The number of shares of Registrant's Common Stock outstanding on May 5,
1998 was 5,561,092.


                                       1

<PAGE>

                             ANAREN MICROWAVE, INC.

                                     INDEX

PART I - FINANCIAL INFORMATION                                          Page No.
                                                                        --------
   Item 1.  Financial Statement (Unaudited)

            Consolidated Condensed Balance Sheets                           3
            March 31, 1998 and June 30, 1997

            Consolidated Condensed Statements of Earnings                   4
            Three months ended March 31, 1998 and
            March 31, 1997

            Consolidated Condensed Statements of Earnings                   5
            Nine months ended March 31, 1998 and
            March 31, 1997

            Consolidated Condensed Statements of Cash Flows -               6
            Nine months ended March 31, 1998 and
            March 31, 1997

            Notes to Consolidated Condensed Financial                       7
            Statements - March 31, 1998


   Item 2.  Management's Discussion and Analysis                            10
            of Financial Condition and Results of Operations

PART II - OTHER INFORMATION

   Item 6.  Exhibits and Reports on Form 8-K                                16


                                       2
<PAGE>

                             ANAREN MICROWAVE, INC.
                                AND SUBSIDIARIES

                      Consolidated Condensed Balance Sheets
                        March 31, 1998 and June 30, 1997

                                                   Unaudited
                Assets                           Mar. 31, 1998     June 30, 1997
                ------                           -------------     -------------
Current assets:
    Cash and cash equivalents                    $  8,685,176      $  3,807,004
    Short-term investments                         15,602,199              --
    Receivables, less allowance
      of $13,000                                    6,464,067         6,717,106
    Inventories                                    10,099,435         7,736,007
    Prepaid expenses                                  249,818           197,152
    Deferred income taxes, current                     85,781           532,054
                                                 ------------      ------------
                Total current assets               41,186,476        18,989,323

Property, plant and equipment                      31,614,859        30,080,173
    Less accumulated depreciation
      and amortization                            (24,091,417)      (23,110,872)
                                                 ------------      ------------
                Net property, plant
                  and equipment                     7,523,442         6,969,301

Other assets, net                                        --              13,919
                                                 ------------      ------------

                                                 $ 48,709,918      $ 25,972,543
                                                 ============      ============
    Liabilities and Stockholders'
      Equity
Current liabilities:
    Current installments of
        long-term debt                           $       --        $    228,723
    Accounts payable                                1,776,465         1,500,863
    Income taxes payable                               89,290           493,553
    Accrued expenses                                1,148,549           719,416
    Customer advance payments                         435,303         1,003,539
                                                 ------------      ------------
                Total current
                  liabilities                       3,449,607         3,946,094

Postretirement benefit obligation                   1,181,276         1,181,276
Long-term debt, less current
  installments                                           --             453,335
Deferred income taxes                                  85,781            64,508
                                                 ------------      ------------
                Total liabilities                   4,716,664         5,645,213
                                                 ------------      ------------

Stockholders' equity:
    Common stock of $.01 par value 
      Authorized 12,000,000 shares;
      issued 6,451,366 shares
      at March 31, 1998 and
      5,012,116 shares
      at June 30, 1997                                 64,514            50,121
    Additional paid-in capital                     36,347,041        15,584,262
    Retained earnings                               9,593,776         6,705,024
                                                 ------------      ------------
                                                   46,005,331        22,339,407
    Less cost of 892,274 shares
      in treasury at March 31, 1998
      and June 30, 1997                            (2,012,077)       (2,012,077)
                                                 ------------      ------------
                Total stockholders'
                  equity                           43,993,254        20,327,330
                                                 ------------      ------------
                                                 $ 48,709,918      $ 25,972,543
                                                 ============      ============


See accompanying notes to consolidated condensed financial statements.


                                       3
<PAGE>

                             ANAREN MICROWAVE, INC.
                                AND SUBSIDIARIES
                  Consolidated Condensed Statements of Earnings

                                                          Unaudited
                                                  For the Three Months Ended:
                                                Mar. 31, 1998    Mar. 31, 1997
                                                (Current Year   (Preceding Year)
                                                -------------   ----------------

Net sales                                        $ 9,951,100      $ 6,059,502

Costs of goods sold                                6,291,273        3,995,195
                                                 -----------      -----------
        Gross profit                               3,659,827        2,064,307
                                                 -----------      -----------

Operating expenses
        Marketing, including sales
          commissions                              1,017,164          895,667
        Research and development                     368,042          149,548
        General and administrative                   748,984          562,119
                                                 -----------      -----------
              Total operating expenses             2,134,190        1,607,334
                                                 -----------      -----------

Operating income                                   1,525,637          456,973
                                                 -----------      -----------
Other income                                         340,294           27,701
Interest expense                                     (13,642)         (19,941)
                                                 -----------      -----------

Income before income taxes                         1,852,289          464,733

Income tax expense                                   681,000             --
                                                 -----------      -----------

Net income                                       $ 1,171,289      $   464,733
                                                 ===========      ===========

Net income per common and common
  share equivalent:
        Basic                                    $      0.21      $      0.11
                                                 ===========      ===========
        Fully diluted                            $      0.20      $      0.11
                                                 ===========      ===========


Shares used in computing net income per
  common and common share equivalent:
        Basic                                      5,540,056        4,106,131
                                                 ===========      ===========
        Fully diluted                              5,737,734        4,354,406
                                                 ===========      ===========

Dividends per share                                 $   --           $   --
                                                    ========         ========

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                             ANAREN MICROWAVE, INC.
                                AND SUBSIDIARIES
                  Consolidated Condensed Statements of Earnings

                                                          Unaudited
                                                   For the Nine Months Ended:
                                                 Mar. 31, 1998    Mar. 31, 1997
                                                (Current Year)  (Preceding Year)
                                                --------------  ----------------

Net sales                                        $ 27,034,203     $ 16,438,865

Costs of goods sold                                17,179,970       11,048,482
                                                 ------------     ------------
        Gross profit                                9,854,233        5,390,383
                                                 ------------     ------------

Operating expenses
        Marketing, including sales
          commissions                               2,945,019        2,326,077
        Research and development                      824,925          379,801
        General and administrative                  2,127,543        1,630,079
                                                 ------------     ------------
              Total operating expenses              5,897,487        4,335,957
                                                 ------------     ------------

Operating income                                    3,956,746        1,054,426
                                                 ------------     ------------

Other income                                          568,208           63,087
Interest expense                                      (57,202)         (72,863)
                                                 ------------     ------------

Income before income taxes                          4,467,752        1,044,650

Income tax expense                                  1,579,000             --
                                                 ------------     ------------

Net income                                       $  2,888,752     $  1,044,650
                                                 ============     ============

Net income per common and common
  share equivalent:
        Basic                                    $       0.60     $       0.25
                                                 ============     ============
        Fully diluted                            $       0.57     $       0.24
                                                 ============     ============


Shares used in computing net income
  per common and common share equivalent:
        Basic                                       4,792,615        4,104,375
                                                 ============     ============
        Fully diluted                               5,067,910        4,309,933
                                                 ============     ============

Dividends per share                                 $    --          $    --
                                                    =========        =========

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES
                 Consolidated Condensed Statements of Cash Flows
                               Nine Months Ended:
                        March 31, 1998 and March 31, 1997

                                                            Unaudited
                                                        -------------------
                                                        1998           1997
                                                        ----           ----
Cash Flows from operating activities:
     Net income                                    $  2,888,752    $  1,044,650
     Adjustments to reconcile net income
       to net cash provided by
       operating activities:
         Depreciation and amortization of
           property, plant and equipment                980,545         940,054
         Deferred income taxes                          467,546            --
         Amortization of intangibles                     13,919           3,518
         Changes in:
           Receivables                                  253,039        (538,070)
           Refundable income taxes                         --           320,945
           Inventories                               (2,363,428)     (1,122,241)
           Prepaid expenses                             (52,666)         43,504
           Accounts payable                             275,602         769,974
           Accrued expenses                             429,133         106,028
           Income taxes payable                        (404,263)           --
           Customer advance payments                   (568,236)        902,627
           Other assets                                    --           (53,418)
                                                   ------------    ------------
             Net cash provided by
               operating activities                   1,919,943       2,417,571
                                                   ------------    ------------

Cash flows from investing activities:
     Capital expenditures                            (1,534,686)       (664,917)
     Purchase of short-term investments             (15,602,199)           --
                                                   ------------    ------------
             Net cash used in
               investing activities                 (17,136,885)       (664,917)
                                                   ------------    ------------

Cash flows from financing activities:
     Principal payments on long-term debt              (682,058)       (266,184)
     Proceeds from issuance of common stock          20,777,172          22,750
                                                   ------------    ------------
             Net cash provided by (used in)
               financing activities                  20,095,114        (243,434)
                                                   ------------    ------------

             Net increase in cash
               and cash equivalents                   4,878,172       1,509,220

Cash and cash equivalents at beginning
  of period                                           3,807,004       1,739,569
                                                   ------------    ------------
Cash and cash equivalents at end of period         $  8,685,176    $  3,248,789
                                                   ============    ============

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
     Cash Paid During the Period For:
       Interest                                    $     68,436    $     59,011
                                                   ============    ============
       Income taxes                                $  1,515,625    $       --
                                                   ============    ============

See accompanying notes to consolidated condensed financial statements.


                                       6
<PAGE>

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

The consolidated condensed financial statements are unaudited (except for the
balance sheet information as of June 30, 1997, which is derived from the
Company's audited consolidated financial statements) and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The consolidated condensed financial
statements should be read in conjunction with the consolidated condensed
financial statements and notes thereto, together with management's discussion
and analysis of financial condition and results of operations, contained in the
Company's fiscal 1997 Annual Report to Stockholders. The result of operations
for the three months and nine months ended March 31, 1998 are not necessarily
indicative of the results for the entire fiscal year ending June 30, 1998, or
any future interim period.

The income tax rates of 35 - 37% utilized for interim financial statement
purposes for the three months and nine months ended March 31, 1998 are based on
estimates of income and utilization of tax credits for the entire year.

NOTE 1:     Inventories

            Inventories at March 31, 1998 and June 30, 1997 are summarized as
            follows:

                                                Mar. 31            June 30
                                                -------            -------

                  Raw materials               $ 4,164,535        $ 3,684,807
                  Work in process               4,630,864          3,072,231
                  Finished goods                1,304,036            978,969
                                              -----------        -----------
                                              $10,099,435        $ 7,736,007
                                              ===========        ===========

NOTE 2:     Property, Plant and Equipment

            Property, plant and equipment at March 31, 1998 and June 30, 1997
            are summarized as follows:

                                                Mar. 31            June 30
                                                -------            -------

             Land and land improvements       $ 1,362,050        $ 1,362,050
             Buildings and improvements         5,199,482          5,129,221
             Machinery and equipment           25,053,327         23,588,902
                                              -----------        -----------
                                              $31,614,859        $30,080,173
                                              ===========        ===========


                                       7
<PAGE>

NOTE 3:     Long-Term Debt

            Long-term debt at March 31, 1998 and June 30, 1997 is comprised of
            the following:

                                                    Mar. 31           June 30
                                                    -------           -------

              Term loan                             $   --           $680,001
                                                                    
              Capitalized lease obligations             --              2,057
                                                    --------         --------
                                                                    
                                                    $   --           $682,058
                                                                    
              Less current installments                 --            228,723
                                                    --------         --------
                                                    $   --           $453,335
                                                    ========         ========

NOTE 4:     Net Income Per Share

            Net income per share is computed based on the weighted average
            number of common shares and common stock options (using the treasury
            stock method) outstanding in accordance with the requirements of
            FASB Statement No. 128 "Earnings Per Share."

            The following table sets forth the computation of basic and fully
            diluted earnings per share:

<TABLE>
<CAPTION>

                                      Three Months Ended        Nine Months Ended
                                      ------------------        -----------------
                                     Mar. 31      Mar. 31      Mar. 31      Mar. 31
Numerator:                              1998         1997         1998         1997
---------                               ----         ----         ----         ----
<S>                               <C>          <C>          <C>          <C>       
Net income available to
  common stockholders             $1,171,289   $  464,733   $2,888,752   $1,044,650
                                  ==========   ==========   ==========   ==========

Denominator:

Denominator for basic
  net income per share:
    Weighted average
      shares outstanding           5,540,056    4,106,131    4,792,615    4,104,375
                                  ==========   ==========   ==========   ==========

Denominator for fully
  diluted net income per share:
    Weighted average
      shares outstanding           5,540,056    4,106,131    4,792,615    4,104,375
    Common stock options             197,678      248,275      275,295      205,558
                                  ----------   ----------   ----------   ----------
    Weighted average shares
      and conversions              5,737,734    4,354,406    5,067,910    4,309,933
                                  ==========   ==========   ==========   ==========
</TABLE>

            Options to purchase 246,500 shares at market prices ranging from
            $4.125 to $19.875 were outstanding during the quarter but were not
            included in the computation of fully diluted earnings per share
            because the options are not yet exercisable.


                                       8
<PAGE>

NOTE 5:     Income Taxes

            Deferred tax assets and liabilities at March 31, 1998 and June 30,
            1997 are summarized as follows:

                                                   Mar. 31            June 30
                                                   -------            -------

        Gross deferred tax assets                $ 1,264,279        $ 1,889,632 
        Less valuation allowance                     420,109            583,104
                                                 -----------        -----------
        Net deferred tax assets                      844,170          1,306,528
                                                                   
        Gross deferred tax liabilities              (844,170)          (838,982)
                                                 -----------        -----------
        Net deferred taxes                       $      --          $   467,546
                                                                   
        Presented as:                                              
          Current deferred tax asset                  85,781            532,054
          Long-term deferred tax liability           (85,781)           (64,508)
                                                 -----------        -----------
                                                 $      --          $   467,546
                                                 ===========        ===========

            The valuation allowance for the deferred tax assets as of March 31,
            1998 and June 30, 1997 was $420,109 and $583,104, respectively. The
            net change in the total valuation allowance for the nine months
            ended March 31, 1998 was a decrease of $162,995. In assessing the
            realizability of deferred tax assets, management considers whether
            it is more likely than not that some portion or all of the deferred
            tax assets will not be realized. The ultimate realization of
            deferred tax assets is dependent upon the generation of future
            taxable income during the periods in which those temporary
            differences become deductible. Management considers the scheduled
            reversal of deferred tax liabilities, projected future taxable
            income, and tax planning strategies in making this assessment. Based
            upon the level of historical taxable income and projections for
            future taxable income over the periods which the deferred tax assets
            are deductible, management believes it is more likely than not the
            Company will realize the benefits of these deductible differences,
            net of the existing valuation allowances at March 31, 1998.

NOTE 6:     Research and Development Costs

            Research and development costs are charged to expense as incurred.
            The Company receives fees under a technology development contract
            and such fees are recorded as a reduction of research and
            development costs as work is performed pursuant to the related
            contract and as defined milestones are attained. Net research and
            development expense for the nine months ended March 31, 1998 and
            1997 are summarized as follows:

                                                      Mar. 31         Mar. 31
                                                      -------         -------
                                                       1998            1997
                                                       ----            ----

       Gross research and development expenses      $1,055,310      $  632,756
                                                                   
       Technology development contract fees            230,385         252,955
                                                    ----------      ----------
         Research and development expense           $  824,925      $  379,801
                                                    ==========      ==========


                                       9
<PAGE>

Management's Discussion and Analysis of Financial and Results of Operations

Management's discussion and analysis reviews the Company's operating results for
the three and nine months ended March 31, 1998 and 1997 and its financial
condition at March 31, 1998. This review should be read in conjunction with the
accompanying consolidated condensed financial statements. Statements contained
in management's discussion and analysis, other than historical facts, are
forward-looking statements that are qualified by the cautionary statements at
the end of this discussion.

Overview

The consolidated condensed financial statements present the financial condition
of the Company as of March 31, 1998 and June 30, 1997 and the consolidated
results of operations and cash flows of the Company for the nine months ended
March 31, 1998 and 1997.

Operations for the third quarter of fiscal 1998 were highlighted by continuing
escalation of commercial Wireless sales, a resurgence of Defense Electronics
sales and a significant improvement in net income over the third quarter of
fiscal 1997.

Net Sales for the third quarter ended March 31, 1998 were $9,951,000, up 64%,
from net sales of $6,060,000 for the same period in fiscal 1997, while net sales
for the first nine months of fiscal 1998 were $27,034,000, up 64% over sales of
$16,439,000 for the first nine months in the previous year. The Company recorded
net earnings of $1,171,000 for the third quarter of fiscal 1998, compared to net
earnings of $465,000 for the same quarter in fiscal 1997, while net earnings for
the first nine months ended March 31, 1998 amounted to $2,889,000, an increase
of 176% over net earnings of $1,045,000 for the first nine months of fiscal
1997.

Results of Operations

The following table sets forth the percentage relationships of certain items
from the Company's consolidated condensed statements as a percentage of net
sales.

                                         Three Months Ended    Nine Months Ended
                                         ------------------    -----------------
                                          Mar. 31   Mar. 31     Mar. 31  Mar. 31
                                            1998     1997        1998     1997
                                            ----     ----        ----     ----
Net sales                                  100.0%   100.0%       100.0%   100.0%
Cost of sales                               63.2     65.9         63.6     67.2
                                           -----    -----        -----    ----- 
  Gross profit                              36.8     34.1         36.4     32.8
                                           -----    -----        -----    ----- 
                                                               
Operating expenses                                             
  Marketing                                 10.2     14.8         10.9     14.2
  Research and development                   3.7      2.4          3.0      2.3
  General and administrative                 7.6      9.3          7.9      9.9
                                           -----    -----        -----    ----- 
          Total operating expenses          21.5     26.5         21.8     26.4
                                           -----    -----        -----    ----- 
                                                               
Operating income                            15.3      7.6         14.6      6.4
                                                               
Other income (expense)                       3.3      0.1          1.9     (0.1)
                                           -----    -----        -----    ----- 
Income before income taxes                  18.6      7.7         16.5      6.3
Income tax expense                           6.8      0.0          5.8      0.0
                                           -----    -----        -----    ----- 
  Net income                                11.8%     7.7%        10.7%     6.3%
                                           =====    =====        =====    ===== 


                                       10
<PAGE>

The following table summarizes the Company's net sales by various product lines
for the periods indicated. Amounts are in thousands.

                                      Three Months Ended      Nine Months Ended
                                      ------------------      -----------------
                                      Mar. 31     Mar. 31    Mar. 31     Mar. 31
                                       1998        1997       1998        1997
                                       ----        ----       ----        ----
Wireless                             $ 4,408     $ 2,123     $12,020     $ 4,551
Satellite Communications               2,324       1,913       6,137       6,127
Defense Electronics                    3,219       2,024       8,877       5,761
                                     -------     -------     -------     -------

                                     $ 9,951     $ 6,060     $27,034     $16,439
                                     =======     =======     =======     =======

Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997.

Net  Sales.  Net sales  for the  three  months  ended  March 31,  1998 were $9.9
million,  up 64% from net sales of $6.1  million  for the third  quarter  of the
previous year.  This increase was led by a 108% rise in the shipment of Wireless
products,  a 59%  increase in sales of Defense  Electronics  products  and a 21%
increase in  shipments  of Satellite  Communications  products.  The increase in
sales of Wireless  products,  which consist of catalog  surface mount and custom
components  for use in building  wireless  base  station  equipment,  was due to
continuing  strong  demand  by the major  wireless  base  station  OEM's for the
company's custom products.  Sales of Satellite  Communications  products,  which
consist of custom multilayer  components such as butler matrixes and beamforming
networks for commercial and military satellites, rose 21% over the third quarter
last year due to initial  shipments in the quarter of beamformers to Loral Space
and  Communications,  Ltd.  for the  Globalstar  program,  as well as  continued
shipments to Lockheed  Martin  Corporation on the ACeS program and a program for
Hughes Space and Communications International, Inc. Sales of Defense Electronics
products, which consist of Digital Frequency Discriminators,  ("DFD's"), Digital
RF Memories (DRFM's"), ESM receivers and Microwave Integrated Circuit Components
("MIC's"),  rose 59% to $3.2  million for the three  months ended March 31, 1998
compared  to $2.0  million  for the  third  quarter  of last year as a result of
shipments of DRFMs for foreign  sales of the  Airborne  Self  Protection  Jammer
("ASPJ") system,  which first entered full production  during the second quarter
of fiscal 1998.

Gross Profit.  Cost of sales  consists  primarily of  engineering  design costs,
material,  material  fabrication  costs,  assembly costs and test costs. Cost of
sales rose  57.5% to $6.3  million  (63.2% of net  sales) for the third  quarter
ended  March 31,  1998  from $4.0  million  (65.9% of net  sales)  for the third
quarter of fiscal 1997. Gross profit was 36.8% of net sales for the three months
ended  March 31,  1998  compared  to 34.1% of net  sales for the same  period in
fiscal 1997. The improvement in gross profit was due to continuing  economies of
scale in the Wireless and Defense  Electronics  groups resulting from the higher
sales volume.

Marketing.  Marketing  expenses  consist  mainly of employee  related  expenses,
commissions  paid to sales  representatives,  trade show  expenses,  advertising
expenses and related travel  expenses.  Marketing  expenses  increased  13.5% to
$1,017,000  (10.2% of net sales) for the three  months ended March 31, 1998 from
$896,000  (14.8% of net sales) for the three months  ended March 31,  1997.  The
increase is a result of higher  commission and advertising  expenses  related to
increased sales volume and further development of the marketing  organization to
support the Company's expanding commercial markets.


                                       11
<PAGE>

Research and Development.  Research and development expenses consist of material
and  salaries  and  related  overhead  costs of  employees  engaged  in  ongoing
research,  design and  development  activities  associated with new products and
technology  development.  Gross  research and  development  costs are reduced by
expense reimbursements  received under a Technology Reinvestment Program through
Raytheon,  for  the  Advance  Research  Project  Agency  of  the  United  States
Government.  Net research and  development  expenses  increased 145% to $368,000
(3.7% of net sales) for the three  months  ended  March 31,  1998 from  $150,000
(2.4% of net sales) for the three  months  ended March 31,  1997.  Research  and
development expenses expanded to support the increased development opportunities
for wireless infrastructure and satellite communications products.

General and Administrative.  General and administrative expenses increased 33.3%
to  $749,000  (7.6% of net  sales) for the three  months  ended  March 31,  1998
compared to $562,000  (9.3% of net sales) for the three  months  ended March 31,
1997.  General  and  administrative  expense  increased  due  to the  hiring  of
additional  employees,  increased staffing levels,  higher professional fees and
increased compensation levels for existing personnel.

Other income.  Other income is primarily  interest  income  received on invested
cash  balances.  Other income  increased to $340,000 (3.4% of net sales) for the
three months ended March 31, 1998 from $28,000 (0.3% of net sales) for the three
months ended March 31, 1997,  due to a higher level of investable  cash balances
in the current  year as a result of the public  offering  completed  in November
1997.

Interest Expense.  Interest expense   represents  interest paid on the Company's
outstanding term loan and letter of credit.  Interest expenses  decreased 30% to
$14,000  (0.1% of net  sales) for the three  months  ended  March 31,  1998 from
$20,000 (0.3% of net sales) for the three months ended March 31, 1997.

Income  Taxes.  Income tax expense for the three months ended March 31, 1998 was
$681,000  (6.8% of net  sales),  an  effective  tax rate of 36.8%.  The  Company
incurred  no income tax for the three  months  ended  March 31,  1997 due to the
utilization   of  the  remainder  of  its  available  loss   carryforwards   and
substantially all of its available tax credits in fiscal 1997.

Nine Months Ended March 31, 1998 Compared to Nine months Ended March 31, 1997.

Net Sales.  Net sales increased 64.6% to $27.0 million for the nine months ended
March 31,  1998 from $16.4  million  for the first nine  months of the  previous
year.  This increase  resulted from a 164% rise in sales of wireless  commercial
products and a 54% increase in shipments of Defense Electronics  products during
the period compared to the first nine months of fiscal 1997. Wireless sales have
risen due to the  escalating  demand from the major  basestation  infrastructure
OEMs, while Defense  Electronic sales have rebounded from fiscal 1997 levels due
to the first  production  shipments of DRFMs for the foreign sales of the "ASPJ"
program. During this same nine month period shipments of Satellite Communication
products were essentially flat compared to the first nine months of fiscal 1997.

Gross  Profit.  Gross  profit for the first nine  months of fiscal 1998 was $9.9
million  (36.4% of net sales) up from $5.4 million  (32.8% of net sales) for the
first nine  months of fiscal  1997.  This  improvement  is a result of the 64.6%
increase in sales volume which resulted in significant economies of scale in the
Company's manufacturing operations.

Marketing  Expense.  Marketing expense increased 26.7% to $2.9 million (10.9% of
net sales) for the first nine months of fiscal 1998 from $2.3 million  (14.2% of
net sales) for the first nine 


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<PAGE>

months of fiscal  1997.  This  increase is a result of the higher  sales  volume
which  generated  larger  commission  expense  and an  increase  in  advertising
expenditures for commercial business. Additionally, the Company is expanding its
Marketing organization to support the expanding order volume.

Research and Development. Research and development expense rose 117% to $825,000
(3.0% of net sales) in the first nine months of fiscal 1998 from $380,000  (2.3%
of net sales) for the first nine months of fiscal 1997. Research and development
expenditures   are  expanding  to  support   further   development  of  wireless
infrastructure products and expanding satellite communications opportunities.

General and Administrative.  General and administrative  expense increased 30.5%
to $2.1  million  (7.9% of net sales) for the nine  months  ended March 31, 1998
from $1.6 million (9.9% for net sales) for the nine months ended March 31, 1997.
General and administrative expense has increased due to the hiring of additional
personnel  and rise in  professional  fees  attributable  to the  growth  of the
Company.

Other income.  Other income  increased  $505,000 to $568,000 (2.1% of net sales)
for the first nine months of fiscal 1998,  from $63,000  (0.4% of net sales) for
the first nine months of fiscal 1997,  due to the large  increase in  investable
cash  resulting  from the public  offering  completed by the Company  during the
second quarter of the current fiscal year.

Interest  Expense.  Interest  expense fell 21.9% to $57,000  (0.2% of net sales)
during the nine months ended March 31, 1998 from $73,000 (0.5% of net sales) for
the nine months ended March 31, 1997, due to the  continuing  decline in Company
debt balances.

Income  Taxes.  Income tax  expense for the first nine months of fiscal 1998 was
$1,579,000 (5.8% of net sales),  an effective tax rate of 35.3%. The Company had
no tax expense in the first nine months of fiscal 1997 due to the utilization of
remaining loss carry forwards and tax credits.

Liquidity and Capital Resources

During  the second  quarter  ended December  31, 1997 the  Company  completed  a
secondary public offering of common stock. This offering resulted in the sale of
1,165,450 new shares and provided net proceeds to the Company after underwriters
fees and offering expenses of $19,750,000.

Net cash provided by operations for the nine months ended March 31, 1998 and the
nine months ended March 31, 1997 were $1,920,000 and  $2,418,000,  respectively.
The positive  flow from  operations in both the first nine months of fiscal 1998
and 1997 was due primarily to the profit attained in both years.  The relatively
lower level of cash  provided by  operations  in the first nine months of fiscal
1998,  compared to the first nine months of fiscal 1997, resulted primarily from
increases in inventory levels due to the higher production volume.

Net cash used in investing activities consists of funds from the public offering
which  were  used  to  purchase  short-term  investment  and  capital  equipment
expenditures.  Capital  equipment  additions  in the nine months ended March 31,
1998 and the nine  months  ended March 31, 1997 were  $1,535,000  and  $665,000,
respectively.

These capital  investments  consisted  primarily of equipment  needed to further
automate production for the Company's new Wireless and Satellite  Communications
products,  as well as test and production  equipment for the initial  production
run of the ASPJ program.


                                       13
<PAGE>

Cash provided by financing  activities  for the nine months ended March 31, 1998
was,  $20,095,000  and consisted of funds  generated  from the Company's  public
stock offering and the exercise of Company  incentive  stock  options.  Of these
funds,  $682,000 was used to pay-off the balance on the  Company's  term loan at
the end of December. Cash used in financing activities for the nine months ended
March 31,  1997 was  $243,000  and  consisted  of,  primarily,  payments  on the
Company's term loan and capitalized lease obligations.

During the remainder of fiscal 1998, the Company's major cash  requirements will
be for additions to capital  equipment and inventory  growth.  Capital equipment
additions for the current year have been budgeted at $1,750,000 and, through the
first nine months of fiscal 1998,  approximately  $1,535,000  has been expended,
all of which was funded by cash generated  from  operations.  Capital  equipment
additions for the  remainder of fiscal 1998 will  continue to be funded  through
cash  generated by operations as projected  operating cash flows are expected to
be more than adequate to meet these financing needs.

During  December,  1997 the Company  renegotiated  its credit  facility with its
bank,  increasing the size of the facility and obtaining  more favorable  terms.
The new credit facility is an unsecured  $10,000,000  working capital  revolving
line of credit bearing interest at prime and maturing December 31, 2000.

The terms of the credit facility  require  maintenance of a minimum tangible net
worth,  ratio of cash flows to maturities,  and leverage ratio as defined in the
respective  agreements.  The Company was in compliance with all restrictions and
covenants at March 31, 1998.

The Company believes that its cash requirements for the foreseeable  future will
be satisfied by  currently  invested  cash  balances,  expected  cash flows from
operations and funds available under its credit facilities.

Recently issued Accounting Pronouncements

The Company adopted Statement of Financial Accounting Standard No. 128, Earnings
Per Share  (statement  128),  beginning  with the second quarter of fiscal 1998.
Statement  128   specifies  the   computation,   presentation   and   disclosure
requirements  for earnings per share.  Adoption of Statement  128 did not have a
material effect on the Company's operating results.

Additionally,  Statement of Financial  Accounting Standard No. 131,  Disclosures
About  Segments of an Enterprise  and Related  Information  (Statement  131) was
issued  in 1997.  Statement  131  establishes  standards  for the  reporting  of
information about operating segments and related  disclosures about products and
services,  geographic areas, and major customers. Adoption of Statement 131 will
be required in fiscal 1999 and require interim  disclosures  beginning in fiscal
2000. Adoption of Statement 131 is not expected to have a material effect on the
Company's financial statement disclosures.

Forward-Looking Cautionary Statement

In an effort to provide  investors  a  balanced  view of the  Company's  current
condition and future growth  opportunities,  this third quarter report  includes
comments by the Company's  management  about future  performance.  Because these
statements are forward-looking statements pursuant to the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995,  management's forecasts
involve risks and uncertainties, and actual results could differ materially from
those predicted in the  forward-looking  statement;  among the principal factors
that could cause actual results to differ materially are the following:  general
market conditions, including demand


                                       14
<PAGE>

for the Company's products,  manufacturing capacity and the ability to "ramp" to
meet  anticipated  demand,  fluctuations  in yield,  availability of third-party
supplier parts at reasonable prices, availability of financial resources to fund
anticipated  growth,  ability to maintain sole supplier  positions  with certain
defense  sectors,  successful  adaptation of existing  Company  technologies  to
produce new products that meet specific customer requirements,  price pressures,
the level of worldwide spending on military defense products, growth of wireless
telephone  and  satellite  communications  systems,  acceptance of new products,
customer  order  cancellations  or  rescheduling  and actual orders  compared to
annual blanket contracts from wireless customers.

Management believes the Company has the products,  human resources,  facilities,
and financial  resources to continue its growth,  but future revenues,  margins,
and profits are all  influenced by a number of risk  factors,  including but not
limited to those discussed above.


                                       15
<PAGE>

Item 6.           Exhibits and Reports on Form 8-K

Item 6(a)         Exhibits

Exhibit No. 27    Financial  Data Schedule for the nine month period ended March
                  31, 1998.

Item 6(b)         Reports on Form 8K

The registrant was not required to file an 8-K during the current fiscal period.


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<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this report  to be  signed  on its  behalf  by the
undersigned thereunto duly authorized.

                                          Anaren Microwave, Inc.
                                          (Registrant)

Date:  May 11, 1998                       /s/ Lawrence A. Sala
                                          --------------------------------------
                                          President & Chief Executive Officer

Date:  May 11, 1998                       /s/ Joseph E. Porcello
                                          --------------------------------------
                                          Vice President of Finance & Controller


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