<PAGE>
 
                 SECURITIES AND EXCHANGE COMMISSION PRIVATE

                           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

                                     OR

           [  ] 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  000-22605

                GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
           (Exact name of registrant as specified in its charter)

         California                                 94-3120525
(State or other jurisdiction of          (IRS Employer Identification No.)
incorporation or organization)

   1155 Market Street, San Francisco                  94103
(Address of principal executive offices)            (Zip Code)
       
    Registrant's telephone number, including area code     (415) 437-1100


                               Not Applicable
            (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
                                                ---       ---
     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:

        Title of each class             Outstanding at March 31, 1998  
        -------------------             -----------------------------
     Common Stock, no par value                21,934,942 shares  
<PAGE>
 
               GENESYS TELECOMMUNICATIONS LABORATORIES, INC. 
                        THIRD QUARTER 1998 FORM 10-Q
                              TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION                                              PAGE
                                                                            ----
ITEM 1.  Financial Statements                                                 3

ITEM 2.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                              11
 
ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk          16
 
PART II. OTHER INFORMATION
 
     ITEM 1.  Legal Proceedings                                              16
     ITEM 2.  Changes in Securities and Use of Proceeds                      17
     ITEM 3.  Defaults Upon Senior Securities                                17
     ITEM 4.  Submission of Matters to a Vote of Security Holders            17
     ITEM 5.  Other Information                                              17
     ITEM 6.  Exhibits and Reports on Form 8-K                               17
 
SIGNATURES                                                                   18

                                       2
<PAGE>
 
                                    PART I
                             FINANCIAL INFORMATION

ITEM 1.  Financial Statements
         --------------------

 Condensed Consolidated Financial Statements

        Condensed Consolidated Balance Sheets as of March 31, 1998 
        and June 30, 1997                                               4  

        Condensed Consolidated Statements of Operations for the         
        three and nine months ended March 31, 1998 and 1997             5  

        Condensed Consolidated Statements of Cash Flows for the 
        nine months ended March 31, 1998 and 1997                       6  

        Notes to Condensed Consolidated Financial Statements            7     

                                       3
<PAGE>
 
                GENESYS TELECOMMUNICATIONS LABORATORIES, INC. 
                    CONDENSED CONSOLIDATED BALANCE SHEETS 
                                (In thousands)

<TABLE> 
<CAPTION> 
                                              ASSETS

                                                                                   March 31,      June 30,
                                                                                     1998           1997  
                                                                                  -----------     --------   
                                                                                  (Unaudited)                        
<S>                                                                               <C>            <C> 
CURRENT ASSETS:
     Cash and cash equivalents ............................................       $ 24,322        $ 47,160
     Short-term investments ...............................................         23,611            --
     Accounts receivable, net .............................................         22,433          18,297 
     Prepaid expenses and other ...........................................          5,462           3,880
                                                                                  -----------     --------   
              Total current assets ........................................         75,828          69,337

PROPERTY AND EQUIPMENT, net ...............................................         11,807           7,383 

OTHER ASSETS ..............................................................          4,308           3,225
                                                                                  -----------     --------   
                                                                                  $ 91,943        $ 79,945
                                                                                  ===========     ========   

                               LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Bank line of credit ..................................................       $   --          $    241
     Current portion of long-term obligations..............................            366             476
     Accounts payable .....................................................          2,583           2,707
     Accrued payroll and related benefits .................................          1,897           1,748
     Other accrued liabilities ............................................          7,431           4,985
     Deferred revenues ....................................................         15,602          12,152
                                                                                  -----------     --------
              Total current liabilities ...................................         27,879          22,309
                                                                                  -----------     --------

LONG-TERM OBLIGATIONS......................................................            111             875
                                                                                  -----------     --------

SHAREHOLDERS' EQUITY:
           Common stock ...................................................         65,571          63,112
           Shareholder notes receivable ...................................           (375)           (434)
           Cumulative translation adjustment...............................           (121)            124
           Accumulated deficit ............................................         (1,122)         (6,041)
                                                                                  -----------     --------
     Total shareholders' equity ...........................................         63,953          56,761
                                                                                  -----------     --------
                                                                                  $ 91,943        $ 79,945
                                                                                  ===========     ========
</TABLE>
         The accompanying notes are an integral part of these condensed
consolidated financial statements.

                                       4
<PAGE>
 
                GENESYS TELECOMMUNICATIONS LABORATORIES, INC.  
                    CONSOLIDATED STATEMENTS OF OPERATIONS  
                   (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                    Three Months Ended                     Nine Months Ended
                                                         March 31,                              March 31,
                                                         --------                               --------
                                                  1998              1997                 1998             1997
                                                  ----              ----                 ----             ----
                                                    (Unaudited)                                (Unaudited)
<S>                                        <C>               <C>                    <C>             <C>
REVENUES:
  License ...................................  $ 18,262            $  9,484           $  47,206          $  20,362
  Service....................................     4,473               1,284              10,918              3,711
                                               --------            --------           ---------          ---------
     Total revenues .........................    22,735              10,768              58,124             24,073
                                               --------            --------           ---------          ---------

COST OF REVENUES:
  License ...................................       969                 490               2,471              1,024
  Service....................................     2,907               1,002               6,957              2,574
                                               --------            --------           ---------          ---------
     Total cost of revenues..................     3,876               1,492               9,428              3,598
                                               --------            --------           ---------          ---------

GROSS MARGIN ................................    18,859               9,276              48,696             20,475
                                               --------            --------           ---------          ---------

OPERATING EXPENSES:
  Research and development...................     4,047               2,707              10,773              6,637
  Sales and marketing........................     9,408               4,464              24,803              9,935
  General and administrative ................     2,194               1,572               6,075              3,765
  Merger costs...............................        --                  --                 905                 --
                                               --------            --------           ---------          ---------
     Total operating expenses ...............    15,649               8,743              42,556             20,337
                                               --------            --------           ---------          ---------

INCOME FROM OPERATIONS.......................     3,210                 533               6,140                138

INTEREST AND OTHER INCOME (EXPENSE),
NET..........................................       436                 (69)              1,165                136
                                               --------            --------           ---------          ---------

INCOME BEFORE PROVISION FOR
  INCOME TAXES...............................     3,646                 464               7,305                274
PROVISION FOR INCOME TAXES...................     1,276                 230               2,386                230
                                               --------            --------           ---------          ---------

NET INCOME ..................................  $  2,370            $    234           $   4,919          $      44
                                               ========            ========           =========          =========

BASIC NET INCOME  PER SHARE .................  $   0.11            $   0.02           $    0.24          $    0.00
                                               ========            ========           =========          =========
DILUTED NET INCOME PER SHARE ................  $   0.09            $   0.01           $    0.18          $    0.00
                                               ========            ========           =========          =========

BASIC WEIGHTED AVERAGE COMMON SHARES ........    21,384              13,554              20,896             13,922
                                               ========            ========           =========          =========

DILUTED WEIGHTED AVERAGE COMMON SHARES ......    26,800              20,776              26,865             19,632
                                               ========            ========           =========          =========
</TABLE>

                                       5
<PAGE>
 
                 GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE> 
<CAPTION> 
                                                                             For the Nine Months                  
                                                                               Ended March 31,                    
                                                                           1998              1997                 
                                                                           ----              ----
                                                                                 (Unaudited)                       
<S>                                                                     <C>             <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income ...................................................       $  4,919        $     44
     Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
        Deferred stock compensation expense .......................            358             150
        Depreciation and amortization .............................          2,616             538
        Provision for doubtful accounts ...........................            678             113
        Changes in operating assets and liabilities:
            Accounts receivable ...................................         (4,814)         (7,462)
            Prepaid expenses and other ............................         (1,827)         (1,201)
            Accounts payable ......................................           (124)          1,052
            Accounts payable to related parties ...................           --              (228)
            Accrued payroll and related benefits ..................          2,446             894
            Other accrued liabilities .............................            149           1,136
            Deferred revenues .....................................          3,450           4,293
                                                                          --------        --------
                Net cash provided by (used in) operating activities          7,851            (671)
                                                                          --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of short-term investments, net .....................        (23,611)            --
     Purchases of property and equipment ..........................         (7,015)         (4,392)
     (Increase) decrease in other assets ..........................         (1,258)         (2,859)
                                                                          --------        --------
                Net cash used in investing activities .............        (31,884)         (7,251)
                                                                          --------        --------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Repayments of advances from related parties ..................           --               (25)
     Repayments of bank line of credit ............................           (241)            (87)
     Principal payments on capital lease obligations ..............            (56)            (34)
     Proceeds from/(Repayments) of long-term obligations ..........           (818)            102
     Repayments of convertible debt to related parties ............           --              (367)
     Proceeds from sales of common stock ..........................          2,310          12,024
                                                                          --------        --------
                Net cash used in financing activities .............          1,195          11,613
                                                                          --------        --------

NET DECREASE IN CASH AND CASH EQUIVALENTS .........................        (22,838)          3,691

CASH AND CASH EQUIVALENTS:
     Beginning of Period ..........................................         47,160           5,900
                                                                          --------        --------
      End of Period ...............................................       $ 24,322        $  9,591
                                                                          ========        ========

      The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE> 

                                       6
<PAGE>
 
                 GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

    The accompanying condensed consolidated financial statements have been
prepared by Genesys Telecommunications Laboratories, Inc. (the Company) without
audit and reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position and the results of
operations of the Company for the interim periods. The statements have been
prepared in accordance with the regulations of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all information and footnotes
required by generally accepted accounting principles. The results of operations
for the nine months ended March 31, 1998 are not necessarily indicative of the
operating results to be expected for the full fiscal year or future operating
periods. The information included in this report should be read in conjunction
with the audited consolidated financial statements and notes thereto for the
fiscal year ended June 30, 1997 and the risk factors as set forth in the
Company's Annual Report on Form 10-K, including, without limitation, risks
relating to limited operating history, potential fluctuations in quarterly
operating results, lengthy sales cycle, lengthy implementation cycle, dependence
on third party consultants, dependence on new products, rapid technological
change, competition, product concentration, management of growth, dependence on
third-party resellers, GeoTel litigation, customer concentration, dependence on
emerging ECTI market, risks associated with international sales and operations,
dependence on key personnel, government regulation of immigration, dependence on
ability to integrate with third-party technology, product liability, protection
of intellectual property, concentration of stock ownership, possible volatility
of stock price, shares eligible for future sale, registration rights, effect of
certain charter provisions, anti-takeover effects of provisions of the by-laws
and uncertainty as to use of proceeds. Any party interested in reviewing these
publicly available documents should write to the SEC or the Chief Financial
Officer of the Company

2.  CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany accounts and transactions
have been eliminated.

3.  ACQUISITION

    In December 1997, the Company acquired all of the outstanding common stock
of Forte Advanced Management Software, Inc. ("Forte") in exchange for
approximately 667,099 shares of the Company's common stock. The Company also
assumed Forte's outstanding options, which were converted to options to purchase
approximately 90,385 shares of the Company's common stock. The merger was
accounted for as a pooling of interests and, accordingly, the accompanying
condensed consolidated financial statements have been restated to reflect the
acquisition on a pooling of interests basis.

                                       7
<PAGE>
 
    Net revenue and income of the separate companies for the nine months ended
March 31, 1998 were:

<TABLE> 
<CAPTION> 
                                                       Genesys            Forte Advanced                         
                                                  Telecommunications        Management                           
                                                  Laboratories, Inc.      Software, Inc.            Combined     
                                                 -------------------      --------------            --------
<S>                                              <C>                      <C>                       <C> 
Nine Months Ended March 31, 1998:
         Total Revenue.........................      $   55,898             $   2,226             $   58,124
         Net Income (Loss).....................           5,298                  (379)                 4,919 
                                                                                                             
Nine Months Ended March 31, 1997:
         Total Revenue.........................      $   21,991             $   2,082             $   24,073
         Net Income (Loss).....................             593                  (549)                    44  
</TABLE> 

4.  NET INCOME PER SHARE

    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"),
which was adopted by the Company in the quarter ended December 31, 1997, and in
accordance with this standard all prior periods presented have been restated to
conform to its provisions. Under the new requirements for calculating earnings
per share, the dilutive effect of potential common shares is excluded from basic
net income per share. Diluted net income per share is computed using the
weighted average number of common and potential common shares outstanding during
the period. Potential common shares consist of preferred stock (using the "if
converted" method) and stock options and warrants (using the treasury stock
method). Potential common shares are excluded from the dilutive computation only
if their effect is anti-dilutive.

    In February 1998, the Securities and Exchange Commission issued Staff
Accounting Bulletin 98, which included SEC requirements related to the adoption
of SFAS 128. The Company applied these provisions to the calculation of basic
and diluted weighted average shares outstanding for all periods presented in the
accompanying statements of operations.

    Pro forma basic weighted average common shares outstanding for the three and
nine months ended March 31, 1997 was 16,600 and 16,800, respectively, assuming 
the conversion of preferred stock upon the completion of the Company's initial 
public offering in June 1997. Pro forma basic earnings per share for the three 
and nine months ended March 31, 1997 was $0.01 and $0.00, respectively.


                                       8
<PAGE>

    Basic and Diluted Weighted Average Common and Potential Common Shares
presented in the accompanying statements of operations (as rounded) are
comprised of the following (in thousands):

<TABLE> 
<CAPTION> 
                                                              Quarter           Nine Months                        
                                                               Ended               Ended                         
                                                             March 31,           March 31,                     
                                                             ---------           ---------
                                                           1998      1997       1998      1997                  
                                                           ----      ----       ----      ----
<S>                                                       <C>       <C>       <C>       <C> 
Weighted average common shares outstanding ...........    20,717    12,887    20,229    13,255

Shares issued in acquisition of Forte ................       667       667       667       667

BASIC WEIGHTED AVERAGE COMMON SHARES..................    21,384    13,554    20,896    13,922
                                                          ======    ======    ======    ====== 
 
Convertible Preferred Stock ..........................      --       3,082      --       2,898

Weighted average options and warrants for                                                      
     common stock.....................................     5,416     4,140     5,969     2,812 

DILUTED WEIGHTED AVERAGE COMMON SHARES................    26,800    20,776    26,865    19,632
                                                          ======    ======    ======    ====== 
</TABLE> 
 
5.  LITIGATION

    On December 17, 1996, GeoTel Communications Corporation ("GeoTel") filed a
lawsuit in the United States District Court for the District of Massachusetts
naming the Company as defendant, and alleging infringement of a patent issued to
GeoTel entitled "Communications System Using a Central Controller to Control at
Least One Network and Agent System", U.S. Patent No. 5,546,452 (the "GeoTel
Patent"). In the complaint, GeoTel requested injunctive relief, an accounting
for damages and an assessment of interest and costs, and other relief as the
court deems just and proper. On February 10, 1997, the Company filed an answer
in response to the complaint filed by GeoTel, asserting that the GeoTel Patent
is invalid, denying the alleged patent infringement and seeking dismissal of the
complaint with prejudice. A non-jury trial has been scheduled for November 30,
1998.  The Company believes that it has meritorious defenses to the asserted
claims and intends to defend the litigation vigorously. GeoTel alleges that the
Genesys Call Router, Genesys Call Center Manager and Genesys Call Concentrator
products, and the T-Server product, as a necessary element of all Genesys
products, infringe the GeoTel Patent. After consultation with patent counsel,
the Company does not believe any of the products described under "Business--
Products" in the Company's Annual Report on Form 10-K infringe any valid claims
of the GeoTel Patent. In connection with the Company's development of the
potential new products described under "Business--Research and Development" in
the Company's Annual Report on Form 10-K, the Company has sought the advice of
such counsel and believes that such potential products can be developed without
infringing the GeoTel Patent; however, there can be no assurance that GeoTel
will not assert infringement of the GeoTel Patent with respect to such potential
new products. Further, the outcome of litigation is inherently unpredictable,
and there can be no assurance that the results of these proceedings will be
favorable to the Company or that they will not have a material adverse effect on
the Company's business, financial condition or results of operations. Regardless
of the ultimate outcome, the GeoTel litigation could result in substantial
expense to the Company and significant diversion of effort by the Company's
technical and managerial personnel. If the Court determines that the Company
infringes GeoTel's patent and that the GeoTel patent is valid and enforceable,
it could issue an injunction against the use or sale of certain of the Company's
products and it could assess significant damages against the Company.
Accordingly, an adverse determination in the proceeding could subject the
Company to significant liabilities and require the Company to seek a license
from GeoTel. Although patent and other intellectual property disputes in the
software area have sometimes been settled through licensing or similar
arrangements, costs associated with such arrangements may be substantial, and
there can be no assurance that a license from GeoTel, if required, would be
available to the Company on acceptable terms or at all.  Accordingly, an adverse
determination in the GeoTel litigation could prevent the Company from licensing
certain of its software products, which would have a material adverse effect on
the Company's business, financial condition and results of operations.

                                       9
<PAGE>
 
6.  RECENTLY ISSUED ACCOUNTING STANDARDS

    In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2 "Software Revenue Recognition" ("SOP 97-2"),
which will be adopted by the Company in fiscal 1999. SOP 97-2 clarifies and
amends certain provisions of Statement of Position 91-1, "Software Revenue
Recognition". The Company does not believe the adoption of the provisions of SOP
97-2 will have a material impact on the Company's financial position or results
of operations.

    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure" ("SFAS 129"), which was adopted by the Company in fiscal
1998. SFAS 129 continues the existing requirements to disclose the pertinent
rights and privileges or all securities other than ordinary common stock but
expands the number of companies subject to portions of its requirements. The
adoption of this statement had no impact on the Company's financial statements.

    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which is required to be adopted by the Company in its first quarter of
fiscal 1999.  At that time, the Company will be required to disclose, in
financial statement format, all non-owner changes in equity.  Such changes
include, for example, cumulative foreign currency translation adjustments,
certain minimum pension liabilities and unrealized gains and losses on
available-for-sale securities.  The Company has studied the implications of SFAS
130 and, based on its initial evaluation, does not expect it to have a material
impact on the Company's financial statements.

    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, " Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which establishes standards
for reporting information about operating segments in annual financial
statements and interim financial reports.   It also establishes standards for
related disclosures about products and services, geographic areas and major
customers.  As defined in SFAS 131, operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision-maker in deciding how to
allocate resources and in assessing performance.  Generally, financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and deciding how to allocate resources to
segments.  The Company will adopt SFAS 131 in fiscal 1999.

                                      10
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Overview

     Genesys Telecommunications Laboratories, Inc. (the "Company") is a leading
provider of enterprise-wide platform and applications software that enables
organizations to integrate critical business information and computing resources
with telephony and other telecommunications media.  The Company's products allow
an organization to optimally manage its customer interactions and employee
communications to increase productivity, lower costs and achieve greater
customer satisfaction and loyalty.  In addition, the Company's products enable
organizations to develop and offer new or enhanced revenue-generating products
and services.  The Company believes that it is the first company to offer a
suite of open, scaleable, enterprise-wide platform and applications software
solutions to address the evolving needs of organizations for intelligent
communications, a new market paradigm known as Enterprise Computer Telephony
Integration ("ECTI").

Results of Operations

     The following table sets forth statement of operations data of the Company
expressed as a percentage of total revenues for the years and periods indicated.

<TABLE> 
<CAPTION> 
                                                Three Months         Nine Months
                                                   Ended                Ended                                  
                                                 March 31,            March 31,                                  
                                                 --------             --------
                                             1998         1997     1998         1997                              
                                             ----         ----     ----         ----
<S>                                          <C>        <C>        <C>       <C> 
Revenues:
     License ...........................       80.3%     88.1%      81.2%     84.6%
     Service ...........................       19.7      11.9       18.8      15.4
                                             ------     -----      -----     -----    
          Total revenues ...............      100.0     100.0      100.0     100.0
                                             ------     -----      -----     -----    
Cost of revenues:
     License ...........................        4.2       4.6        4.2       4.2
     Service ...........................       12.8       9.3       12.0      10.7
                                             ------     -----      -----     -----    
          Total cost of revenues .......       17.0      13.9       16.2      14.9
                                             ------     -----      -----     -----    
Gross Margin ...........................       83.0      86.1       83.8      85.1
                                             ------     -----      -----     -----    
Operating expenses:
     Research and development ..........       17.8      25.1       18.5      27.6
     Sales and marketing ...............       41.4      41.5       42.7      41.3
     General and administrative ........        9.6      14.6       10.4      15.6
     Merger costs ......................       --        --          1.6       --    
                                             ------     -----      -----     -----    
          Total operating expenses .....       68.8      81.2       73.2      84.5
                                             ------     -----      -----     -----    
Income from operations .................       14.1       4.9       10.6       0.6
Interest and other income (expense), net        1.9      (0.6)       2.0       0.6
                                             ------     -----      -----     -----    
Income before provision for income taxes       16.0       4.3       12.6       1.2
Provision for income taxes .............        5.6       2.1        4.1       1.0
                                             ------     -----      -----     -----    
Net income..............................       10.4%      2.2%       8.5%      0.2%
                                             ======     =====      =====     =====    
</TABLE> 

                                       11
<PAGE>
 
Revenues

     License. License revenues increased by 92.6% from $9.5 million in the three
months ended March 31, 1997 to $18.3 million in the three months ended March 31,
1998.  License revenues increased by 131.8% from $20.4 million in the first nine
months of fiscal 1997 to $47.2 million in the first nine months of fiscal 1998.
This increase was due to additional licenses of the Company's products which
resulted from the market's growing acceptance of the Company's products and
underlying technology, an expansion of the Company's product offerings, and a
significant increase in the Company's sales, marketing and customer service
organizations. The Company does not believe that the historical growth rates of
license revenues will be sustainable or are indicative of future results.

     Service. Service revenues primarily comprise fees from consulting, post-
contract support and, to a lesser extent, training services. Service revenues
increased by 248.4% from $1.3 million in the three months ended March 31, 1997
to $4.5 million in the three months ended March 31, 1998.  Service revenues
increased by 194.2% from $3.7 million in the first nine months of fiscal 1997 to
$10.9 million in the first nine months of fiscal 1998. The Company's software
license agreements often provide for maintenance, consulting and training.
Accordingly, increases in licensing activity have resulted in increases in
revenues from services related to maintenance, consulting and training.

     If the Company is successful in implementing its strategy of encouraging
third-party organizations such as systems integrators to undertake a greater
percentage of implementation of the Company's products, service revenues may
decrease as a percentage of total revenues, while maintenance as a percentage of
total revenues is expected to increase. The Company does not believe that the
historical growth rates of service revenues will be sustainable or are
indicative of future results.


Cost of Revenues

     License. Cost of license revenues includes the costs of product media,
product duplication and manuals, as well as allocated labor and overhead costs
associated with the preparation and shipment of products. Cost of license
revenues were $969,000 and $490,000, in the three months ended March 31, 1998
and 1997, respectively, and $2.5 million and $1.0 million in the nine months
ended March 31, 1998 and 1997, respectively. The increase in absolute dollar
amounts relates primarily to an increase in the volume of products shipped by
the Company, and the resulting increase in documentation material costs and
personnel necessary to assemble and ship the products.

     Service. Cost of service revenues are primarily comprised of employee-
related costs incurred in providing consulting, post-contract support and
training services. Cost of service revenues were $2.9 million and $1.0 million
in the three months ended March 31, 1998 and 1997, respectively, and were $7.0
million and $2.6 million in the nine months ended March 31, 1998 and 1997,
respectively. The increase in absolute dollars was due primarily to increases in
consulting, support and training personnel, and increases in overhead costs
associated with travel, computer equipment and facilities. The cost of service
revenues as a percentage of service revenues may vary between periods due to the
mix of services provided by the Company and the resources used to provide these
services.


Operating Expenses

     For the three months ended March 31, 1998 and 1997, the Company's operating
expenses were $15.6 million and $8.7 million, or 68.8% and 81.2% of total
revenues, respectively.  For the nine months ended March 31, 1998 and 1997, the
Company's operating expenses were $42.6 million and $20.3 million, or 73.2% and
84.5% of total revenues, respectively.

                                       12
<PAGE>
 
     Research and Development. Research and development expenses were $4.0
million and $2.7 million, or 17.8% and 25.1% of total revenues in the three
months ended March 31, 1998 and 1997, respectively and $10.8 million and $6.6
million, or 18.5 % and 27.6% of total revenues in the nine months ended March
31, 1998 and 1997, respectively. These expenses increased in absolute dollars
and as a percentage of total revenues primarily as a result of an increase in
personnel to support the Company's product development activities. The Company
expects that research and development expenditures will continue to increase in
absolute dollars.

     Research and development expenses are generally charged to operations as
incurred. In accordance with Statement of Financial Accounting Standards No. 86,
the Company capitalized approximately $1.3 million of software development costs
incurred in the nine months ended March 31, 1998 related to the development of
its 5.0 and 5.1 product suite. Costs that were eligible for capitalization in
the nine months ended March 31, 1997 were insignificant, and accordingly the
Company charged all software development costs to research and development
expense in this period.

     Sales and Marketing. Sales and marketing expenses were $9.4 million and
$4.5 million, representing 41.4% and 41.5% of total revenues in the three months
ended March 31, 1998 and 1997, respectively and $24.8 million and $9.9 million,
or 42.7% and 41.3% of total revenues in the nine months ended March 31, 1998 and
1997, respectively. These expenses increased in absolute dollars primarily due
to the Company's investment in building a direct sales force in North America
and, to a lesser extent, in Europe, and the Company's investment in expanding
its channel sales force in North America, Europe and the Asia Pacific. In
addition, the Company incurred increased marketing expenses associated with the
Company's expanding product line, including trade shows and promotional
expenses. The Company expects to continue to expand its direct sales and
marketing efforts and to develop a significant channel sales organization, and
therefore, anticipates sales and marketing expenditures will continue to
increase significantly in absolute dollars.

     General and Administrative. General and administrative expenses were $2.2
million and $1.6 million, or 9.6% and 14.6% of total revenues in the three
months ended March 31, 1998 and 1997, respectively and $6.1 million and $3.8
million, or 10.4% and 15.6% of total revenues in the nine months ended March 31,
1998 and 1997, respectively. These expenses increased in absolute dollars during
these periods principally due to the addition of staff and information system
investments to support the growth of the Company's business during these
periods. In addition, the Company has incurred higher legal costs associated
primarily with general corporate matters, trademark matters and patent filings.
The Company expects to continue to increase its general and administrative staff
and to incur other costs necessary to manage a growing organization and for
legal expenses that are expected to increase in connection with the GeoTel
litigation, and, accordingly, it expects general and administrative expenses to
continue to increase in absolute dollars.  General and administrative expenses
as a percentage of total revenues have decreased from 14.6% in the third quarter
of fiscal 1997 to 9.6% in the third quarter of fiscal 1998 and from 15.6% for
the first nine months of fiscal 1997 to 10.4% in the first nine months of fiscal
1998, due principally to the significant investments made by the Company in 1997
in anticipation of significant growth during fiscal 1997 and 1998.  The Company
expects to continue to increase general and administrative expenses in absolute
dollars, but expects that these expenses as a percentage of total revenues will
stabilize.

     Merger Costs. The Company incurred $905,000 of merger costs in connection
with the merger of Forte Advanced Management Software, Inc. during the nine
months ended March 31, 1998.  The costs consisted primarily of legal and
accounting fees.

 
                                       13
<PAGE>
 
Provision for Income Taxes

     The Company's effective tax rate for the three months ended March 31, 1998
was 35%, which the Company estimates will be the effective tax rate for the
remainder of fiscal 1998.   In the quarter ended December 31, 1997, the Company
recorded a one-time credit relating to the benefit of deferred tax assets
assumed in the acquisition of Forte Advanced Management Software, Inc. which was
an S-Corporation prior to the merger.  In accordance with the provisions of SFAS
109 and APB 16, such benefit is recorded in the period in which the merger is
consummated.  As a result of this benefit, the Company's effective tax rate for
the nine months ended March 31, 1998 was 33%.

Liquidity and Capital Resources

     In June 1997, the Company completed its initial public offering in which it
raised approximately $41.2 million from the sale of 2,375,000 shares of common
stock and the exercise of certain Warrants. Prior to its initial public
offering, the Company had financed its operations and met its capital
expenditure requirements primarily from proceeds from related party advances, a
$1.5 million term note (of which $900,000 was converted into Series A Preferred
Stock) and the private sale of Preferred Stock, from which the Company raised
$17.2 million. At March 31, 1998, the Company's primary sources of liquidity
included cash and cash equivalents of $24.3 million and short-term investments
of $23.6 million.

     The Company generated cash from operating activities of $8.1 million in the
nine months ended March 31, 1998 related primarily to an increase in net income
and an increase in deferred revenues.  The Company used cash in operating
activities of $671,000 in the nine months ended March 31, 1997 related primarily
to an increase in accounts receivable.

     The Company used cash to purchase $23.6 million of short-term investments
and $7.0 million of property and equipment in the nine months ended March 31,
1998.  The Company used cash to purchase $4.4 million of property and equipment
in the nine months ended March 31, 1997.

     The Company has established subsidiaries in foreign countries, including
the United Kingdom, France, Canada, Russia, Japan and Australia, which function
primarily as sales offices in those locations. The Company expects to establish
offices in other foreign countries as it continues to expand its international
operations. The capital expenditures necessary to establish a foreign office are
not significant, and, accordingly, the Company does not expect that the
establishment of these subsidiaries will have a material adverse effect on its
liquidity and capital resources.

     In connection with the sale of Series C Preferred Stock, the Company has
committed to the expenditure of approximately $1.0 million toward the
development of certain call center technology. The Company's commitment is
cancelable by the Company in the event it encounters unforeseen technical
obstacles or business challenges. The Company does not believe that this
commitment will have a material adverse effect on its liquidity and capital
resources.

     The Company believes that its existing sources of liquidity will satisfy
the Company's projected working capital and capital requirements for at least
the next twelve months.

                                       14
<PAGE>
 
Quarterly Results of Operations and Forward Looking Statements

     The Company's quarterly operating results have in the past fluctuated and
may in the future fluctuate significantly, depending on a number of factors,
many of which are beyond the Company's control, including: market acceptance of
the Company products; the Company's ability to develop and market new products
and product enhancements; new product releases by the Company and its
competitors and the timing of such releases; the size, timing and recognition of
revenue from significant orders; the length of sales and implementation cycles;
the Company's ability to integrate acquired businesses; competition; the
Company's success in establishing indirect sales channels and expanding its
direct sales force; the Company's success in retaining and training third-party
support personnel; the delay or deferral of significant revenues until
acceptance of software required by an individual license transaction;
technological changes in the ECTI market; the deferral of customer orders in
anticipation of new products and product enhancements; purchasing patterns of
indirect channel partners and customers; changes in pricing policies by the
Company and its competitors; the mix of revenues derived from the Company's
direct sales force and various indirect distribution and marketing channels; the
mix of revenues derived from domestic and international customers; seasonality;
changes in operating expenses; changes in relationships with strategic partners;
changes in Company strategy; personnel changes; foreign currency exchange rate
fluctuations; the ability of the Company to control its costs; and general
economic factors.

     While the Company generally operates with limited backlog, from time to
time it receives orders from customers that are for project development over an
extended period of time. During the nine months ended March 31, 1998, the
Company received a commitment from BT totaling 10 million pounds, and the
Company estimates that the deployment of this order will occur over a 12 to 24
month period. The Company derives substantially all of its revenues from
licenses of the Company's platform and related applications software and
services. The Company believes that the purchase of its products is relatively
discretionary and generally involves a significant commitment of capital and
other resources by a customer. The Company's typical order size per site ranges
from $100,000 to $300,000; however, several orders during the nine months ended
March 31, 1998 have exceeded $500,000 each. The timing of the receipt and
shipment of a single order can have a significant impact on the Company's
revenues and results of operations for a particular quarter. In situations
requiring customer acceptance of implementation, the Company does not recognize
license revenues until installations are complete and does not recognize the
consulting component of service revenues until the services are rendered. As a
result, revenue recognition may be delayed in many instances. Historically, the
Company has often recognized a substantial portion of its revenues in the last
month of a quarter, with these revenues frequently concentrated in the last two
weeks of a quarter. As a result, product revenues in any quarter are
substantially dependent on orders booked and shipped in that quarter, and
revenues for any future quarter are not predictable with any meaningful degree
of certainty. Product revenues are also difficult to forecast because the market
for ECTI software products is rapidly evolving, and the Company's sales cycle,
which may last from three to nine months or more, varies substantially from
customer to customer. The Company's quarterly revenues are also subject to
seasonal fluctuations, particularly in the quarter ending in September when
reduced activity outside North America during the summer months can adversely
affect the Company's revenues. The Company's expenses are relatively fixed and
are based, in part, on its expectations as to future revenues. Consequently, if
future revenue levels were below expectations, net income would be
disproportionately affected because a proportionately smaller amount of the
Company's expenses varies with its revenues. In addition, the Company expects
that sales derived through indirect channels, which are more difficult to
forecast and generally have lower gross margins than direct sales, will increase
as a percentage of total revenues. Due to all of the foregoing factors, the
Company believes that period-to-period comparisons of its results of operations
are not meaningful and should not be relied upon as indications of future
performance. It is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be
materially adversely affected.

     Because of these factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and that
such comparisons should not be relied upon as indications of future performance.

                                       15
<PAGE>
 
         Certain statements contained in this Quarterly Report on Form 10-Q,
including, without limitation, statements containing the words "believes,"
"anticipates," "estimates," "expects," and words of similar import, constitute
"forward looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 regarding events, conditions and financial trends that may
affect the Company's future plans, business strategy, results of operations and
financial position.  Readers are referred to the "Risk Factors" section of the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission, which identify important risk factors that could cause actual
results to differ from those contained in the forward-looking statements.


ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

         Not applicable.

PART II. OTHER INFORMATION 


ITEM 1.  Legal Proceedings
         -----------------

         On December 17, 1996, GeoTel Communications Corporation ("GeoTel")
filed a lawsuit in the United States District Court for the District of
Massachusetts naming the Company as defendant, and alleging infringement of a
patent issued to GeoTel entitled "Communications System Using a Central
Controller to Control at Least One Network and Agent System", U.S. Patent No.
5,546,452 (the "GeoTel Patent"). In the complaint, GeoTel requested injunctive
relief, an accounting for damages and an assessment of interest and costs, and
other relief as the court deems just and proper. On February 10, 1997, the
Company filed an answer in response to the complaint filed by GeoTel, asserting
that the GeoTel Patent is invalid, denying the alleged patent infringement and
seeking dismissal of the complaint with prejudice. A non-jury trial has been
scheduled for November 30, 1998. The Company believes that it has meritorious
defenses to the asserted claims and intends to defend the litigation vigorously.
GeoTel alleges that the Genesys Call Router, Genesys Call Center Manager and
Genesys Call Concentrator products, and the T-Server product, as a necessary
element of all Genesys products, infringe the GeoTel Patent. After consultation
with patent counsel, the Company does not believe any of the products described
under "Business--Products" in the Company's Annual Report on Form 10-K infringe
any valid claims of the GeoTel Patent. In connection with the Company's
development of the potential new products described under "Business--Research
and Development" in the Company's Annual Report on Form 10-K, the Company has
sought the advice of such counsel and believes that such potential products can
be developed without infringing the GeoTel Patent; however, there can be no
assurance that GeoTel will not assert infringement of the GeoTel Patent with
respect to such potential new products. Further, the outcome of litigation is
inherently unpredictable, and there can be no assurance that the results of
these proceedings will be favorable to the Company or that they will not have a
material adverse effect on the Company's business, financial condition or
results of operations. Regardless of the ultimate outcome, the GeoTel litigation
could result in substantial expense to the Company and significant diversion of
effort by the Company's technical and managerial personnel. If the Court
determines that the Company infringes GeoTel's patent and that the GeoTel patent
is valid and enforceable, it could issue an injunction against the use or sale
of certain of the Company's products and it could assess significant damages
against the Company. Accordingly, an adverse determination in the proceeding
could subject the Company to significant liabilities and require the Company to
seek a license from GeoTel. Although patent and other intellectual property
disputes in the software area have sometimes been settled through licensing or
similar arrangements, costs associated with such arrangements may be
substantial, and there can be no assurance that a license from GeoTel, if
required, would be available to the Company on acceptable terms or at all.
Accordingly, an adverse determination in the GeoTel litigation could prevent the
Company from licensing certain of its software products, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.

                                       16
<PAGE>
 
ITEM 2.  Changes in Securities and Use of Proceeds
         -----------------------------------------

         During the period covered by this report, there were no changes in the
rights of holders of any class of securities of the Company and no unregistered
sales of equity securities.

         On June 16, 1997, the Company's registration statement on Form S-1 (SEC
File No. 333-24479) was declared effective.  The registration statement
registered for offer and sale 2,500,000 (2,875,000 shares including over-
allotments) of the Company's Common Stock, no par value, for an aggregate price
of $45 million ($51.75 million including over-allotments) (the "Offering").
Pursuant to the Offering, which was completed in June 1997, the Company sold
2,375,000 shares, including over-allotments, of Common Stock and certain
shareholders of the Company sold 500,000 shares of Common Stock.  The shares in
the Offering were sold in a firm commitment underwriting that was co-managed by
Goldman Sachs & Company, Lehman Brothers and Robertson, Stephens & Company (now
known as BancAmerica Robertson Stephens).  The amount of underwriting expenses
incurred by the Company in connection with the Offering were approximately
$1,990,500, resulting in net proceeds to the Company in the amount of
$37,137,000.

         As of March 31, 1998, none of the net proceeds from the Offering have
been used by the Company, and the net proceeds are held in cash or high-grade
short-term investments. The Company's planned use of proceeds is as described in
the registration statement.


ITEM 3.  Defaults Upon Senior Securities
         -------------------------------

         Not applicable.


ITEM 4.  Submission of Matters to a Vote of Security Holders 
         ---------------------------------------------------

         Not applicable.


ITEM 5.  Other Information
         -----------------

         Not applicable.

 
ITEM 6.  Exhibits and Reports on Form 8-K
         --------------------------------

         (a)  Exhibits

         Exhibit
         Number    Exhibit
         -------   -------
         27.1      Financial Data Schedule

         (b)  Reports on Form 8-K. On January 15, 1998, the Company filed a
              Report on Form 8-K dated December 31, 1997 relating to the
              Company's acquisition and merger of Forte Advanced Management
              Software, Inc. a California corporation.

                                       17
<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.


                             GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
 


Date: May 13, 1998           By: /s/ Gregory Shenkman
                                 _________________________________________
                                 Gregory Shenkman
                                 President and Chief Executive Officer

Date: May 13, 1998           By: /s/ Michael J. McCloskey
                                 __________________________________________
                                 Michael J. McCloskey
                                 Chief Operating Officer, Chief Financial 
                                 Officer and Secretary; Vice President, Finance
                                 and International

                                       18