<PAGE>
 
                                 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 28, 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  0-23263

                          EXCEL SWITCHING CORPORATION
                          ---------------------------
             (Exact name of registrant as specified in its charter)

            Massachusetts                                    04-2992806
            -------------                                    ----------
(State or other jurisdiction of Employer              (I.R.S. Identification 
     incorporation or organization)                           Number)

                             255 Independence Drive
                             ----------------------
                          HYANNIS, MASSACHUSETTS 02601
                          ----------------------------
              (Address of principal executive offices) (Zip code)

                                 (508) 862-3000
                                 --------------
              (Registrant's telephone number, including area code)

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: [ ]

     As of May 5, 1998, there were 32,729,400 shares of the Registrant's Common
Stock, $.01 par value, outstanding.

                                       1
<PAGE>
 
                          EXCEL SWITCHING CORPORATION

                                   FORM 10-Q

                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
PART I.  - FINANCIAL INFORMATION                                           PAGE
<S>                                                                       <C>
  ITEM 1.  Consolidated Condensed Financial Statements

     Consolidated Condensed Balance Sheets as of December 27, 1997
       and March 28, 1998                                                    3
 
     Consolidated Condensed Statements of Income for the
       three months ended March 29, 1997 and March 28, 1998                  4
 
     Consolidated Condensed Statements of Cash Flows for
       the three months ended March 29, 1997 and March 28, 1998              5
 
     Notes to Consolidated Condensed Financial Statements                    6
 
  ITEM 2.  Management's Discussion and Analysis of  Financial
            Condition  and Results of Operations                             8
 
  ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk       16
 
PART II - OTHER INFORMATION
 
  ITEM 1.  Legal Proceedings                                                17
           
  ITEM 2.  Changes in Securities and Use of Proceeds                        17
           
  ITEM 3.  Defaults Upon Senior Securities                                  18
           
  ITEM 4.  Submission of Matters to a Vote of Security Holders              18
           
  ITEM 5.  Other Information                                                18
           
  ITEM 6.  Exhibits and Reports on Form 8-K                                 18
 
SIGNATURES                                                                  19
 
EXHIBIT INDEX                                                               20
</TABLE>

                                       2
<PAGE>
 
                          EXCEL SWITCHING CORPORATION
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                    ASSETS
<TABLE> 
<CAPTION> 
                                                                         DECEMBER 27,      MARCH  28,
                                                                             1997            1998
<S>                                                                     <C>               <C>
CURRENT ASSETS:
 Cash and cash equivalents                                                 $ 47,968         $ 48,226
 Marketable securities                                                       66,929           67,359
 Accounts receivable, net of reserves of $1,350                              12,843           14,048
 Inventories                                                                  4,740            5,609
 Prepaid taxes                                                                  122                -
 Deferred tax asset                                                           5,626            6,044
 Other current assets                                                         1,298            1,877
                                                                           --------         --------
     Total current assets                                                   139,526          143,163
 
PROPERTY AND EQUIPMENT, NET                                                  10,168           12,296
                                                                           --------         --------
                                                                           $149,694         $155,459
                                                                           ========         ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Current maturities of long-term obligations                               $  4,213         $  1,078
 Accounts payable                                                             4,177            4,312
 Accrued expenses                                                            11,156           13,543
 Accrued income taxes                                                         3,606            3,654
                                                                           --------         --------
     Total current liabilities                                               23,152           22,587
                                                                           --------         --------
DEFERRED INCOME TAXES                                                           519              467
                                                                           --------         --------
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES                                  108               64
                                                                           --------         --------
STOCKHOLDERS' EQUITY:
 Preferred stock, $.01 par value
  authorized--10,000,000 shares; no shares outstanding                            -                -
 Common stock, $.01 par value--authorized--100,000,000 
  shares issued and outstanding32,592,000 and 32,722,200 
  shares at December 27, 1997 and March 28, 1998, respectively                  326              327
 
 Additional paid-in capital                                                  88,134           89,376
 Deferred compensation                                                         (491)            (676)
 Unrealized loss on investments                                                 (20)              (2)
 Retained earnings                                                           37,966           43,316
                                                                           --------         --------
     Total stockholders' equity                                             125,915          132,341
                                                                           --------         --------
                                                                           $149,694         $155,459
                                                                           ========         ========
</TABLE>
  The accompanying notes are an integral part of these consolidated condensed
                             financial statements.

                                       3
<PAGE>
 
                          EXCEL SWITCHING CORPORATION
                                        
                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED
                                                                     MARCH 29,               MARCH 28,
                                                                       1997                    1998
<S>                                                               <C>                     <C>
Revenues                                                               $18,518                $25,556
 
Cost of Revenues                                                         5,860                  7,580
                                                                       -------                -------
     Gross profit                                                       12,658                 17,976
                                                                       -------                -------
Operating Expenses:
 Engineering, research and development                                   2,942                  4,726
 Selling and marketing                                                   2,297                  3,920
 General and administrative                                              1,959                  2,418
                                                                       -------                -------
     Total operating expenses                                            7,198                 11,064
                                                                       -------                -------
 
     Income from operations                                              5,460                  6,912
 
Other Income, net                                                           44                  1,648
                                                                       -------                -------
 
     Income before provision for income taxes                            5,504                  8,560
 
Provision for Income Taxes                                               2,201                  3,210
                                                                       -------                -------
Net Income                                                             $ 3,303                $ 5,350
                                                                       =======                =======
Basic Earnings per Share                                                  $.12                   $.16
                                                                       =======                =======
Diluted Earnings per Share                                                $.10                   $.14
                                                                       =======                =======
 
Basic Weighted Average Shares Outstanding                               28,090                 32,645
 
Diluted Weighted Average Shares Outstanding                             33,202                 38,936
</TABLE>

  The accompanying notes are an integral part of these consolidated condensed
                             financial statements.

                                       4
<PAGE>
 
                          EXCEL SWITCHING CORPORATION

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED
                                                                         MARCH 29,              MARCH 28,
                                                                           1997                   1998
<S>                                                                   <C>                    <C>
Cash Flows from Operating Activities:
 Net income                                                               $3,303                $ 5,350
 Adjustments to reconcile net income to net cash provided by
  operating activities
  Depreciation and amortization                                              461                    725
  Unrealized gain on investments                                               -                     18
  Deferred income taxes                                                     (513)                  (470)
  Compensation expense associated with the grant of stock
   options, net of forfeitures                                                17                     40
 
  Changes in assets and liabilities
   Accounts receivable                                                      (416)                (1,205)
   Inventories                                                               956                   (869)
   Prepaid taxes                                                               -                    122
   Other current assets                                                       18                   (579)
   Accounts payable                                                          740                    135
   Accrued expenses                                                          974                  2,386
   Accrued income taxes                                                     (448)                 1,013
                                                                          ------                -------
             Net cash provided by operating activities                     5,092                  6,666
                                                                          ------                -------
Cash Flows from Investing Activities:
 Purchases of property and equipment                                        (585)                (2,853)
 Purchases of marketable securities, net                                       -                   (430)
                                                                          ------                -------
            Net cash used in investing activities                           (585)                (3,283)
                                                                          ------                -------
Cash Flows from Financing Activities:
 Payments on long-term obligations                                          (122)                (3,179)
 Proceeds from the exercise of stock options                                   -                     54
                                                                          ------                -------
            Net cash used in financing activities                           (122)                (3,125)
                                                                          ------                -------
Net Increase in Cash and Cash Equivalents                                  4,385                    258
Cash and Cash Equivalents, beginning of period                             4,069                 47,968
                                                                          ------                -------
Cash and Cash Equivalents, end of period                                  $8,454                $48,226
                                                                          ======                =======
Supplemental Disclosure of Cash Flow Information:
  Cash paid during the period for
  Interest                                                                $   87                $    22
                                                                          ======                =======
  Taxes                                                                   $6,738                $ 2,545
                                                                          ======                =======
</TABLE>

  The accompanying notes are an integral part of these consolidated condensed
                             financial statements.

                                       5
<PAGE>
 
                          EXCEL SWITCHING CORPORATION

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                        
Note 1 - Interim Consolidated Condensed Financial Statements

     The accompanying unaudited interim consolidated condensed financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission for reporting on 
Form 10-Q. Accordingly, certain information and footnote disclosure required for
complete financial statements are not included herein. It is recommended that
these financial statements be read in conjunction with the consolidated
financial statements and related notes of Excel Switching Corporation (the
"Company") for the year ended December 27, 1997 as reported in the Company's
Annual Report on Form 10-K. In the opinion of management, all adjustments
(consisting of normal, recurring adjustments) considered necessary for a fair
presentation of financial position, results of operations and cash flows at the
dates and for the periods presented have been included. The consolidated
condensed balance sheet presented as of December 27, 1997 has been derived from
the consolidated financial statements that have been audited by the Company's
independent public accountants. The results of operations for the three months
ended March 28, 1998 may not be indicative of the results that may be expected
for the year ended December 26, 1998, or for any other period.

Note 2 - Earnings Per Share

          In March 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, Earnings Per Share.  This statement established standards for
computing and presenting earnings per share and applies to entities with
publicly traded common stock or potential common stock.  This statement is
effective for fiscal years ending after December 15, 1997.  In February 1998,
the Securities and Exchange Commission  (SEC) issued Staff Accounting Bulletin
(SAB) No. 98.  This bulletin revises the SEC's guidance for calculating earnings
per share with respect to equity security issuances before an initial public
offering (IPO) and is effective for fiscal years ending after December 15, 1997.
The prior period's earnings per share have been retroactively restated to
reflect the adoption of SFAS No. 128 and SAB No. 98.

          Basic earnings per share was determined by dividing net income by the
weighted average common shares outstanding during the period.  Diluted earnings
per share was determined by dividing net income by diluted weighted average
shares outstanding.  Diluted weighted average shares reflect the dilutive
effect, if any, of common stock options based on the treasury stock method.  The
calculations of basic and diluted weighted average shares outstanding are as
follows (in thousands):

                                       6
<PAGE>
 
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                                        --------------------------------
                                                        MARCH 29, 1997    MARCH 28, 1998
                                                        --------------    --------------
<S>                                                  <C>                    <C>
Basic weighted average common shares outstanding            28,090             32,645
                                                          
Weighted average common equivalent shares                    5,112              6,291
                                                            ------             ------
Diluted weighted average shares outstanding                 33,202             38,936
                                                            ======             ======
</TABLE>

Note 3  Comprehensive Income

     Comprehensive income for the three month period ended March 28, 1998 is
approximately $5,361,000.  The difference between comprehensive income and net
income relates to unrealized gains on marketable securities.  There were no
differences between comprehensive income and net income for the three month
period ended March 29, 1997.

Note 4 - Significant Customers

     Sales to significant customers as a percentage of the Company's total 
revenues were as follows:
 
<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED
                                        --------------------------------
                                        MARCH 29, 1997    MARCH 28, 1998
                                        --------------    --------------
<S>                                     <C>                <C>
Significant Customer A                        *                 22.2%
                                     
Significant Customer B                      36.4%               10.2%
                                     
Significant Customer C                        *                 10.2%
</TABLE>

* Sales derived from these customers were less than 10% of the Company's total 
  revenues for the period.

                                       7
<PAGE>
 
ITEM  2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

          The following discussions contain statements which may be "forward-
looking" statements and are subject to risks and uncertainties that could cause
actual results to differ significantly from expectations.  In particular,
statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which are not historical facts, including,
but not limited to, statements regarding the anticipated adequacy of cash
resources to meet the Company's working capital requirements and statements
regarding the anticipated proportion of revenues to be derived from a limited
number of customers, may constitute forward-looking statements.  Factors that
might cause such a difference include those relating to: fluctuations in
quarterly results of operations; dependence on and concentration of
relationships with application developers, original equipment manufacturers
(OEMs) and systems integrators; length of sales cycle; concentration of
customers; dependence on single and sole source suppliers; dependence on third-
party manufacturers; and management of growth and hiring of additional
personnel.  Other factors may include, but are not limited to, those relating to
the evolving market for telecommunication services; concentrated product family;
risk of new product introductions; rapid technological change; dependence on key
personnel; highly competitive market; and compliance with regulations and
evolving industry standards; dependence on proprietary rights; risks associated
with international sales; and other risks identified in the Company's Securities
and Exchange Commission filings including those risks identified in the section
entitled "Risk Factors" of the Company's Annual Report for the fiscal year ended
December 27, 1997 on Form 10-K.

OVERVIEW

     Excel Switching Corporation (the "Company"), is a leading provider of open
switching platforms for telecommunications networks worldwide.  The Company
develops, manufactures, markets and supports a family of open, programmable,
carrier-class switches that address the complex enhanced services and wireless
and wireline infrastructure needs of network providers.  Excel's products offer
network providers the flexibility to address multiple market applications and
the scalability to deploy a variety of system capacities.  The Company's
programmable switching platforms enable network providers to deliver improved
networking functionality at a lower cost than purchasing, upgrading or
reprogramming traditional, closed, central office switches.  The Company sells
to a variety of customers in the worldwide telecommunications market, including
application developers, original equipment manufacturers ("OEMs") and systems
integrators.

          Excel offers a family of programmable switching platforms that are
designed with distributed architecture and open software to maximize performance
and provide multiple levels of programmability and redundancy.  Excel's open
switching platforms integrate with a wide variety of host computer systems,
operating systems and application development environments.  The Company's
product family scales from approximately 100 to 30,720 ports.  Using Excel's
patented Programmable Protocol Language ("PPL"), application developers can
customize the 

                                       8
<PAGE>
 
switching software to their unique requirements, allowing them to introduce new
services and applications rapidly. As customer requirements evolve, the Excel
platform can be upgraded without requiring extensive and complex programming
changes to the underlying software.

     The Company sells to a variety of customers in the worldwide
telecommunications market, including application developers, OEMs and system
integrators.  Excel's customers integrate the Company's open, programmable
switching platforms with their product offerings to address a variety of market
applications for network providers, ranging from enhanced services such as voice
messaging, one number services and prepaid debit cards, to wireless and wireline
infrastructure services such as tandem switching, mobile switching centers and
intelligent base station controllers.
 
RESULTS OF OPERATIONS

          The following table sets forth, for the periods indicated, the
percentage of revenues represented by certain items reflected in the Company's
Consolidated Condensed Statements of Income:

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED
                                    ---------------------------
                                    MARCH 29,          MARCH 28,
                                      1997               1998
                                    --------           -------- 
<S>                               <C>                 <C>
Revenues........................      100.0%             100.0%
Cost of revenues................       31.6               29.7
                                      -----              -----
   Gross profit.................       68.4               70.3
                                      -----              -----
Operating expenses:                                      
   Engineering, research and                             
     development................       15.9               18.5
   Selling and marketing........       12.4               15.3
   General and administrative...       10.6                9.5
                                      -----              -----
     Total operating expenses...       38.9               43.3
                                      -----              -----
   Income from operations.......       29.5               27.0
Other income, net...............         .2                6.5
   Income before provision for                           
     income taxes...............       29.7               33.5
Provision for income taxes......       11.9               12.6
                                      -----              -----
Net income......................       17.8%              20.9%
                                      =====              =====
</TABLE>
                                        
THREE MONTHS ENDED MARCH 29, 1997 AND MARCH 28, 1998

     Revenues.  The Company's revenues consist of sales, primarily in the United
States, of its open, programmable switching platforms and related components.
Revenues increased 38% from $18.5 million in the three months ended March 29,
1997 to $25.6 million for the 

                                       9
<PAGE>
 
comparable period in 1998. This increase resulted from the introduction of new
or expanded offerings by existing customers incorporating the Company's
products, the expansion of customers' existing markets and the introduction of
applications by new and existing customers. In addition, revenues increased due
to increased market penetration resulting from the efforts of the Company's
expanded selling and marketing organizations.

          Revenues from the Company's five largest customers represented
approximately 57.2% and 55.6% of the Company's revenues for the first quarters
of 1997 and 1998, respectively.  During the 1998 period the following customers
represented greater than 10% of the Company's revenue:  Qualcomm Incorporated
represented approximately 22.2%; Comverse Network Systems (Comverse) (formerly
Boston Technology, Inc.)  represented approximately 10.2%; and Brite Voice
Systems, Inc. represented approximately 10.2%.  During the 1997 period Comverse
was the only significant customer and represented approximately 36.4% of the
Company's revenue.  Although the Company's largest customers have varied from
period to period, the Company believes that revenues derived from current and
potential large customers will continue to represent a significant portion of
revenues, and that its results of operations in any given period will continue
to depend to a significant extent upon sales to a limited number of customers.
There can be no assurance that the Company's principal customers will continue
to purchase products at current levels, if at all.

     Gross Profit.  Cost of revenues consists primarily of the cost of purchased
components and subassemblies, contract manufacturing costs, labor and overhead
relating to material procurement, final assembly, testing and quality control,
and warranty and post sale support costs.  Cost of revenues increased 29.4% from
$5.9 million in the three months ended March 29, 1997 to $7.6 million for the
comparable period in 1998.  Gross margin increased from 68.4% in the first
quarter of 1997 to 70.3% in the comparable period of 1998.  The increase in
gross margins is primarily attributable to lower component prices and changes in
product mix.

     Engineering, Research and Development.  Engineering, research and
development costs consist primarily of compensation and related costs of
engineering and development personnel, materials and supplies consumed in
prototype development and related facility and equipment costs. Engineering,
research and development costs increased 60.6% from $2.9 million in the first
quarter of 1997 to $4.7 million for the comparable period in 1998.  As a
percentage of revenues, these costs were 15.9% and 18.5%, respectively, in such
periods.  The increase in engineering, research and development costs in
absolute dollars was primarily attributable to an increase in engineering and
research personnel.

     Selling and Marketing.  Selling and marketing costs consist primarily of
compensation and related costs for sales, marketing and customer support
personnel, travel and advertising, trade show and other promotional activities.
Selling and marketing costs increased 70.7% from $2.3 million in the first
quarter of 1997 to $3.9 million for the comparable period of 1998.  As a
percentage of revenues, these costs were 12.4% and 15.3%, respectively, in such
periods.  The increase in selling and marketing costs in absolute dollars was
primarily attributable to an increase in sales, marketing and customer support
personnel as well as trade show and promotional activities during 1998.

                                       10
<PAGE>
 
     General and Administrative.  General and administrative costs include
compensation and related costs of management, finance and administrative
personnel, professional services, costs to implement and maintain manufacturing
and management information systems and other general corporate expenses.
General and administrative costs increased 23.4% from $2.0 million in the first
quarter of 1997 to $2.4 million for the comparable period in 1998.  As a
percentage of revenues, these costs were 10.6% and 9.5%, respectively, in such
periods.  The increase in general and administrative costs in absolute dollars
was primarily attributable to increases in administrative, finance and
information technology personnel.

     Other Income.  Other income is primarily composed of interest income.
Other income increased from $44,000 in the first quarter of 1997 to $1.6 million
for the comparable period in 1998.  This increase was primarily attributable to
the interest income derived from the net proceeds of approximately $87.1 million
received from the Company's initial public offering in November 1997.

     Provision For Income Taxes.  The Company's effective rate for Federal and
state income taxes was approximately 40.0% and 37.5% for the first quarters of
1997 and 1998.  The decrease is effective tax rates is primarily attributable to
a decrease in the effective state income tax rate and the utilization of certain
tax credits.

LIQUIDITY AND CAPITAL RESOURCES

     At March 28, 1998, the Company's principal sources of liquidity consisted
of cash, cash equivalents and marketable securities of approximately $115.6
million, working capital of approximately $120.6 million and $15.0 million of
funds available under a bank line of credit.  At December 27, 1997, the Company
had $114.9 million invested in cash, cash equivalents and marketable securities.

     In January 1998, the Company repaid all outstanding bank obligations
totaling approximately $3.1 million under the Mortgage and Security Agreement,
promissory note payable and the Real Estate Promissory Note.  In January 1998,
the Company executed a Purchase and Sale Agreement to purchase approximately
108,000 square feet of land for approximately $324,000 and also completed an
agreement providing Excel with an option to purchase up to an additional 274,000
square feet of land at a total cost of approximately $821,000.  This option does
not expire until January 2000 subject to an annual, non-refundable payment of
$71,000.  The total cost of the land acquisition will be funded by existing cash
resources.

     The Company believes that available cash and investments and cash
funds generated from operations will be sufficient to meet the Company's
anticipated cash requirements for working capital and capital expenditures for
at least the next twelve months.

                                       11
<PAGE>
 
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

     Statements contained in this Quarterly Report on Form 10-Q that are
not historical fact may constitute forward-looking statements and are made under
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995.  The Company's actual results of operations and financial condition may in
the future vary significantly from those stated in any forward-looking
statements.  Factors that may cause such differences include, but are not
limited to, the risks, uncertainties and other information discussed within this
Quarterly Report on Form 10-Q and other risks identified in the Company's
Securities and Exchange Commission filings, including those risks identified in
the Company's Annual Report for the fiscal year ended December 27, 1997 on Form
10-K.

     The following discussion of the Company's risk factors should be read
in conjunction with the consolidated financial statements and related notes
thereto set forth elsewhere in this report and in the Company's Annual Report
for the fiscal year ended December 27, 1997 on Form 10-K.  The following
factors, among others, could cause actual results to differ materially from
those set forth in forward-looking statements contained or incorporated by
reference in this report and presented by management from time to time.  Such
factors, among others, may have a material adverse effect upon the Company's
business, results of operations and financial condition:

     Fluctuations in Results of Operations.  The Company's results of
operations have varied significantly in the past and may vary significantly in
the future, on a quarterly and annual basis, as a result of a variety of
factors, many of which are outside the Company's control.  These factors
include, without limitation: (i) the timing and size of orders which are
received and can be shipped in any particular period; (ii) the commercial
success of the Company's products; (iii) delays in the introduction of products
or product enhancements by the Company and the Company's ability to introduce
new products and technologies on a timely basis; (iv) the financial stability of
the Company's major customers; (v) the timing of new product introductions or
announcements by the Company or its competitors; (vi) the availability of
adequate supplies of key components and assemblies and the adequacy of third-
party manufacturing capabilities; (vii) the seasonality of the placement of
customer orders; (viii) the timing and nature of selling and marketing expenses
such as tradeshows and advertising campaigns; (ix) the timing of development
expenditures and personnel changes; (x) the publications of opinions about the
Company and its products, or its competitors or their products, by industry
analysts; (xi) customer order deferrals in anticipation of product enhancements
or new product offerings by the Company or its competitors; and (xii) customer
cancellation of orders and the gain or loss of significant customers, including
those due to industry combinations.  Moreover, any downturn in general economic
conditions could precipitate significant reductions in corporate spending for
telecommunications infrastructure, which could result in delays or cancellations
of orders for the Company's products. The Company's expense levels have been
relatively fixed and are based, in significant part, on expectations of future
revenues.  Consequently, if revenue levels are below expectations, expense
levels could be disproportionately high as a percentage of revenues, and the
Company's business, financial condition and results of operations would be
materially adversely affected.  The Company has 

                                       12
<PAGE>
 
historically operated with little backlog because its products are generally
shipped within 60 days of acceptance of an order. As a result, revenues in any
quarter are substantially dependent on orders booked and shipped in that quarter
and on sales by the Company's customers to end users.

     The Company also believes that the purchase of its own products
generally involves a significant commitment of a customer's capital resources.
Therefore, any downturn in any customer's business could have a material adverse
effect on the Company's revenues, business, financial condition and quarterly
results of operations.  In addition, the Company historically has recognized a
large portion of its revenues from sales booked and shipped in the last month of
a quarter such that the magnitude of quarterly fluctuations may not become
evident until late in, or at the end of, a particular quarter.  Because a number
of the Company's individual orders are for significant amounts, the failure to
ship a significant order in a particular quarter could materially adversely
affect revenues and results of operations for such quarter.  To the extent that
significant sales occur earlier than expected, results of operations for
subsequent quarters may be materially adversely affected.  Due to these and
other factors, the Company's quarterly revenues, expenses and results of
operations could vary significantly in the future, and period-to-period
comparisons should not be relied upon as indications of future performance.
There can be no assurance that the Company will be able to increase its revenues
in future periods or be able to sustain its level of revenues or its rate of
growth on a quarterly or annual basis.

     Due to all the foregoing factors, it is possible that in some future
quarter, the Company's results of operations will be below the expectations of
public market analysts and investors.  In such event, the market price of the
Company's Common Stock would likely be materially adversely affected.

     Dependence on Relationships with Application Developers, OEMs and Systems
Integrators.  The Company sells substantially all of its products to, and
maintains strategic relationships with, application developers, original
equipment manufacturers ("OEMs") and systems integrators which incorporate the
Company's products into their service and product offerings.  As a result, sales
of the Company's products are dependent upon the continued market acceptance of
the service and product offerings of the Company's customers.  Although the
Company maintains contractual relationships with a substantial number of its
customers, such contracts do not provide for minimum purchase requirements, nor
do they contain provisions requiring the exclusive purchase of the Company's
products.  The development of an application or service for the
telecommunications market can involve a substantial amount of time and expense.
The delay or failure of a customer's application development program
incorporating the Company's products could delay or prevent expected sales of
the Company's products.  The inability or cessation of customers to integrate
the Company's products into their service and product offerings, product
development delays by application developers and other customers, lack of market
acceptance of the service and product offerings of the Company's customers or a
customer's decision to market products manufactured by a competitor of the
Company, or the manufacture of such products themselves, would have a material
adverse effect on the Company's business, financial condition and results of
operations.

                                       13
<PAGE>
 
     Additionally, selling through indirect channels may limit the
Company's information concerning the volume of products sold by the Company's
customers to end users and the Company's contact with its end users.  As a
result, the Company's ability to forecast revenues accurately (notwithstanding
the forecasts of its customers), elevate end-user satisfaction and recognize
emerging end-user requirements may be hindered.

     Length of Sales Cycle.  The time between the date of initial contact
with a potential customer and large-scale commercialization of a new customer
application or system based on the Company's products is often lengthy,
typically ranging from 12 to 24 months or more, and is subject to delays over
which the Company has little or no control, including customers' budgetary
constraints, acceptance reviews, and the possibility of cancellation of projects
by customers.  Although the Company attempts to develop its products with the
goal of shortening the time to market of its customers' products, the timing of
the commercialization of a new customer application or service based on the
Company's products is primarily dependent on the success and timing of a
customer's own internal development program. Delays can also be caused by late
deliveries by other vendors, changes in implementation priorities and slower
than anticipated growth in demand for services that the Company's products
support.  A delay in, or cancellation of, the sale of the Company's products
could have a material adverse effect on the Company's business, financial
condition and results of operations and cause the Company's results of operation
to vary significantly from quarter to quarter.

     Concentration of Customers.  During the three months ended March 28,
1998 the following customers represented greater than 10% of the Company's
revenue: Qualcomm Incorporated represented approximately 22.2%; Comverse Network
Systems (Comverse) (formerly Boston Technology, Inc.) represented approximately
10.2%; and Brite Voice Systems, Inc. represented approximately 10.2%.  In this
same period, the Company's five largest customers accounted for approximately
55.6% of the Company's revenues.  Although the Company's largest customers have
varied from period to period, the Company anticipates that its results of
operations in any given period will continue to depend to a significant extent
upon sales to a small number of customers.  None of the Company's customers has
entered into a long-term supply agreement requiring any of them to purchase a
minimum amount of product from the Company.  There can be no assurance that the
Company's principal customers will continue to purchase product from the Company
at current levels, if at all, or that the Company will be able to replace such
purchases with sales to other customers.  The loss of one or more major
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.

     Dependence on Single and Sole Source Suppliers.  The Company purchases many
critical components from single or sole source vendors. The inability to develop
alternative sources for these components or to obtain sufficient quantities of
these components could result in delays or reductions in product shipments which
could materially adversely affect the Company's business, financial condition
and results of operations. In the event of a reduction or interruption of
supply, a significant amount of time, in some cases as much as three to four
months, could be required before the Company would begin receiving adequate
supplies from such alternative suppliers. Further, in such event, the Company's
business, financial condition 

                                       14
<PAGE>
 
and results of operations would be materially adversely affected. In addition,
the manufacture of certain of these single or sole source components is
extremely complex, and the Company's reliance on the suppliers of these
components exposes the Company to potential production difficulties and quality
variations, which could negatively impact cost and timely delivery of the
Company's products. Certain components are available from only one supplier, for
which there is no substitute at this time. If supply of these components should
cease, the Company would be required to redesign its products. No assurance can
be given that supply problems will not occur or, if such problems do occur, that
satisfactory solutions would be available. The Company does not have long-term
contracts with its suppliers and there can be no assurance that these suppliers
will continue to be able to produce these components or to meet the Company's
requirements. Any significant interruption in the supply, or degradation in the
quality, of any such component could have a material adverse effect on the
Company's business, financial condition and results of operations.

     Although the Company generally requires its customers to submit quarterly
forecasts of their needs, the Company's customers frequently require rapid
delivery after placement of a purchase order. Because the Company does not
maintain significant component inventories, a delay in shipment by a supplier
could lead to lost sales. Lead times for materials and components may vary
significantly and depend on factors such as specific supplier performance,
contract terms and general market demand for components. If orders vary from
forecasts, the Company may experience excess or inadequate inventory of certain
materials and components. While the Company has not experienced shortages and
allocations of these components to date, any shortages in the future, including
those occasioned by increased sales, could result in delays in fulfillment of
customer orders. Such delays, shortages and allocations could have a material
adverse effect on the Company's business, financial condition and results of
operations.

     Dependence on Third-Party Manufacturers.  The Company relies on a limited
number of independent manufacturers, some of which are small, privately held
companies, to provide certain components and assemblies made to the Company's
specifications. These manufacturers substantially complete production of the
Company's products, which are then shipped to the Company for final assembly and
quality control. In the event that any of the Company's subcontractors were to
experience financial, operational, production or quality assurance difficulties
or a catastrophic event that resulted in a reduction or interruption in supply
to the Company, the Company's business, financial condition and results of
operations would be materially adversely affected until the Company was able to
establish sufficient manufacturing capabilities from alternative sources. There
can be no assurance that alternative manufacturing sources will be able to meet
the Company's future requirements or that existing or alternative sources will
continue to be available to the Company at favorable prices.

     Management Growth and Hiring of Additional Personnel.  The Company has
experienced growth in revenues and expansion of its operations which have placed
significant demands on the Company's management, engineering and administration
staff and facilities.  The Company has recently hired additional engineering,
sales and other personnel.  The Company is also implementing additional
financial and management procedures which the Company believes will address
increasing demands on resources.  However, the Company 

                                       15
<PAGE>
 
believes that further improvements in management and operational controls are
needed, and will continue to be needed, to manage any future growth. Continued
growth will also require the Company to hire more engineering, selling and
marketing and administrative personnel, expand customer support capabilities,
expand management information systems and improve its inventory management
practices. The Company has at times experienced, and continues to experience,
difficulty in recruiting qualified personnel. Recruiting qualified personnel is
an intensely competitive and time-consuming process. There can be no assurance
that the Company will be able to attract and retain the necessary personnel to
accomplish its growth strategies or that it will not experience constraints that
will adversely affect its ability to satisfy customer demand in a timely fashion
or to support satisfactorily its customers and operations. If the Company's
management is unable to manage growth effectively, the Company's business,
financial condition and results of operations could be materially adversely
affected.

     While the Company believes its current and planned facilities are adequate
to meet its needs through the next 12 months, future growth may require the
Company to obtain additional or alternative facilities.  Due to the limited
supply of suitable additional or alternative office and manufacturing space in
the Cape Cod, Massachusetts area, there can be no assurance that such space can
be leased or acquired without substantial required renovations.  Relocation of
any segment of the Company's operations may disrupt business and have a material
adverse effect on the Company's business, financial condition and results of
operations.  In addition, the local permitting and variance procedures for the
renovation of buildings or new construction in the Cape Cod area is more onerous
than found in metropolitan areas.  Accordingly, there can be no assurance that
the Company will not be required in the future to devote significant resources
to the permitting and renovation of additional facilities or in relocating some
or all of the Company's facilities.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

  Not applicable.

                                       16
<PAGE>
 
PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
 
          None

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

(c)  Recent Sales of Unregistered Securities

The following information is furnished with regard to all securities issued by
the Registrant during the period ended March 28, 1998 that were not registered
under the Securities Act of 1993, as amended (the "Securities Act").

During the three months ended March 28, 1998 options granted to employees of the
Company under the Registrant's Stock Option Program were exercised for common
stock, $.01 par value per share, as follows:

<TABLE>
<CAPTION>
                         Number of      Exercise      Aggregate Purchase   
        Date               Shares         Price               Price        
---------------------  -------------  ------------  ----------------------- 
<S>                    <C>            <C>           <C>
December 29, 1997                600        $ 0.33         $   200.01
February 4, 1998              25,200        $ 0.33         $ 8,400.41
February 4, 1998               5,000        $0.002         $     8.25
February 5, 1998              18,200        $ 0.33         $ 6,066.97
February 9, 1998                 300        $ 0.33         $   100.01
February 10, 1998              2,500        $ 0.33         $   833.38
February 13, 1998              2,000        $ 0.33         $   666.70
February 17, 1998                400        $ 0.33         $   133.34
February 23, 1998              4,000        $ 0.33         $ 1,333.40
February 25, 1998              1,000        $ 0.33         $   333.35
February 26, 1998              2,000        $ 0.33         $   666.70
March 3, 1998                 66,000        $ 0.33         $22,001.10
March 3, 1998                  3,000        $ 4.50         $13,500.00
                             -------                       ----------
                             130,200                       $54,243.62
                             =======                       ==========
</TABLE>

All such issuances were made in reliance upon Rule 701 promulgated under the
Securities Act

                                       17
<PAGE>
 
      (d) Use of Proceeds

      The Company has invested the net proceeds from the initial public offering
in November 1997 in investment grade, interest-bearing securities. To date, the
Company has utilized the net proceeds from the initial public offering as
follows:


Net offering proceeds                           $87,106,000
Purchases of property and equipment              (2,853,000)
Payments on long term obligations                (3,179,000)
                                                ----------- 
Remaining offering proceeds, March 28, 1998     $81,074,000
                                                ===========

      None of the net proceeds from the IPO were used to pay, directly or
indirectly, directors, officers, persons owning ten percent or more of the
Company's equity securities, or affiliates of the Company.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

               Exhibit 27 - Financial Data Schedule

(b)   Reports on Form 8-K

              None

                                       18
<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 hereunto duly authorized.

                                   Excel Switching Corporation
                                            (Registrant)



Dated:  May 11, 1998               /s/ Robert P. Madonna
                                   ---------------------
                                   Robert P. Madonna
                                   President, Chief Executive Officer and
                                   Chairman of the Board of Directors (Principal
                                   Executive Officer)


Dated:  May 11, 1998               /s/ Stephen S. Galliker
                                   -----------------------
                                   Stephen S. Galliker
                                   Vice President, Finance and Administration 
                                   and Chief Financial Officer (Principal 
                                   Financial and Accounting Officer)

                                       19
<PAGE>
 
 EXHIBIT INDEX
 -------------

 Exhibit No.                  Description
 -----------                  -----------

     27            Financial Data Schedule (EDGAR)