<PAGE>   1


                       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 JUNE 30, 2001

                                       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: 000-24193

                          ATLANTIC DATA SERVICES, INC.
             (Exact Name of Registrant as Specified in its Charter)


          MASSACHUSETTS                                         04-2696393
 (State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                           Identification Number)


                              ONE BATTERYMARCH PARK
                           QUINCY, MASSACHUSETTS 02169

               (Address of Principal Executive Offices) (Zip Code)

                                (617) 770 - 3333
              (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 August 10, 2001, there were 13,023,126 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.

<PAGE>   2

                          ATLANTIC DATA SERVICES, INC.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
PART I - FINANCIAL INFORMATION

ITEM 1:    Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2001 (Unaudited)
  and March 31, 2001                                                                                       3

Condensed Consolidated Statements of Operations for the Three Months
  Ended June 30, 2001 and 2000 (Unaudited)                                                                 4

Condensed Consolidated Statements of Cash Flows for the Three Months
 Ended June 30, 2001 and 2000 (Unaudited)                                                                  5

Notes to Condensed Consolidated Financial Statements                                                       6

ITEM 2:    Management's Discussion and Analysis of Financial Condition and
           Results of Operations                                                                           9

ITEM 3:    Quantitative and Qualitative Disclosures about Market Risk                                     12


PART II - OTHER INFORMATION

ITEM 2:    Changes in Securities and Use of Proceeds                                                      13

ITEM 6:    Exhibits and Reports on Form 8-K                                                               13


SIGNATURES                                                                                                14
</TABLE>


                                       2
<PAGE>   3

                                     PART I

ITEM 1:  Financial Statements

                          ATLANTIC DATA SERVICES, INC.

                      Condensed Consolidated Balance Sheets
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                          JUNE 30,         MARCH 31,
                                                                            2001             2001
                                                                         -----------      ---------
                                                                         (Unaudited)
<S>                                                                      <C>              <C>
ASSETS
Current assets:
     Cash and cash equivalents                                             $ 32,361       $ 36,655
     Accounts receivable, net of allowances for doubtful accounts of
      $425 at June 30, 2001 and $375 at March 31, 2001                        2,167          3,090
     Prepaid expenses                                                           673            243
     Deferred taxes                                                            --              464
                                                                           --------       --------
         Total current assets                                                35,201         40,452
Long-term investment                                                          3,000          3,000
Property and equipment, net                                                     958            629
Acquired intangible assets                                                    1,100           --
Goodwill                                                                      1,291           --
Other assets                                                                    317            536
                                                                           --------       --------
TOTAL ASSETS                                                               $ 41,867       $ 44,617
                                                                           ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:

     Accounts payable                                                      $    425       $    538
     Accrued expenses and other liabilities                                   2,363          2,828
     Billings in excess of costs and estimated earnings                        --               86
                                                                           --------       --------
         Total current liabilities                                            2,788          3,452
                                                                           --------       --------
Commitments

Stockholders' equity:
     Preferred stock, $.01 par value, 1,000,000 authorized, no shares
       issued or outstanding                                                   --             --
     Common stock, $.01 par value, 60,000,000 shares authorized,
       13,135,126 shares issued and 13,023,126 outstanding at
       June 30, 2001 and 13,135,126 shares issued and
       13,023,126 outstanding at March 31, 2001                                 131            131
     Additional paid-in capital                                              27,537         26,900
     Retained earnings                                                       11,436         14,159
     Treasury stock (112,000 shares carried at cost)                            (25)           (25)
                                                                           --------       --------
         Total stockholders' equity                                          39,079         41,165
                                                                           --------       --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 41,867       $ 44,617
                                                                           ========       ========
</TABLE>


See accompanying Notes to Condensed Consolidated Financial Statements.


                                       3
<PAGE>   4

                          ATLANTIC DATA SERVICES, INC.

                 Condensed Consolidated Statements of Operations
                      (in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                   June 30,
                                                           -----------------------
                                                              2001           2000
                                                           --------       --------
<S>                                                        <C>            <C>
Revenues                                                   $  4,554       $  9,527
Cost of revenues                                              3,757          6,692
                                                           --------       --------
Gross profit                                                    797          2,835
                                                           --------       --------
Operating expenses:
     Sales and marketing                                        998          1,005
     General and administrative                               1,583          1,826
     Restructuring expense                                      925           --
                                                           --------       --------
         Total operating expenses                             3,506          2,831
                                                           --------       --------
Income (loss) from operations                                (2,709)             4
Interest income, net                                            372            536
                                                           --------       --------
Income (loss) before provision for income taxes              (2,337)           540
Provision for income taxes                                      386            250
                                                           --------       --------
         Net income (loss)                                 $ (2,723)      $    290
                                                           ========       ========
Basic earnings per share                                   $  (0.21)      $   0.02
                                                           ========       ========
Diluted earnings per share                                 $  (0.21)      $   0.02
                                                           ========       ========
Shares used in computing earnings per share (basic)          13,023         12,985
                                                           ========       ========
Shares used in computing earnings per share (diluted)        13,023         13,234
                                                           ========       ========
</TABLE>


See accompanying Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>   5

                          ATLANTIC DATA SERVICES, INC.

                 Condensed Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                                                           JUNE 30,
                                                                                   -----------------------
                                                                                      2001           2000
                                                                                   ---------      --------
<S>                                                                                <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)                                                                  $ (2,723)      $    290
Adjustments to reconcile net income (loss) to net cash used in
  operating activities:
     Depreciation and amortization                                                       84            129
     Deferred taxes                                                                     464            113
     Provision for bad debts                                                            (50)          --
     Change in assets and liabilities (net of effect of acquisition):
         Accounts receivable                                                            973           (808)
         Prepaid expenses and other assets                                             (202)           (79)
         Accounts payable                                                              (113)            (6)
         Accrued expenses and other liabilities                                        (641)        (1,372)
         Billings in excess of costs and estimated earnings on
          contracts                                                                     (86)           (42)
         Federal and state income taxes                                                --                5
                                                                                   --------       --------
Net cash used in operating activities                                                (2,294)        (1,770)
                                                                                   --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of assets                                                                (2,000)          --
Purchase of property and equipment                                                     --              (56)
                                                                                   --------       --------
Net cash used in investing activities                                                (2,000)           (56)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options under stock option plans                       --               51
                                                                                   --------       --------
Net cash provided by financing activities                                              --               51
                                                                                   --------       --------
Net decrease in cash and cash equivalents                                            (4,294)        (1,775)

Cash and cash equivalents, beginning of period                                       36,655         38,347
                                                                                   --------       --------
Cash and cash equivalents, end of period                                           $ 32,361       $ 36,572
                                                                                   ========       ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
     Taxes                                                                         $     13       $    277
                                                                                   ========       ========
</TABLE>


See accompanying Notes to Condensed Consolidated Financial Statements.


                                       5
<PAGE>   6

                          ATLANTIC DATA SERVICES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  June 30, 2001

1.       BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared by Atlantic Data Services, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended June 30, 2001 are
not necessarily indicative of the results that may be expected for future
periods of the full fiscal year. These Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated Financial
Statements and related notes included in the Company's Annual Report on Form
10-K for the year ended March 31, 2001.

The balance sheet at March 31, 2001 has been derived from the audited financial
statements at that date, but does not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company primarily derives its revenue from consulting services under time
and material billing arrangements. Under these arrangements, revenue is
recognized as the services are provided. Deferred revenue pertains to time and
material billing arrangements and represents cash collected in advance of the
performance of services.

Revenue on fixed price contracts is recognized using the percentage of
completion method of accounting and is adjusted monthly for the cumulative
impact of any revision in estimates. The Company determines the percentage of
its contracts by comparing costs incurred to date to total estimated costs.
Contract costs include all direct labor and expenses related to the contract
performance. An asset, "Costs and estimated earnings in excess of billings on
contracts," would represent revenues recognized in excess of amounts billed. The
liability, "Billings in excess of costs and estimated earnings on contracts,"
represents billings in excess of revenues recognized.

Included in revenues are reimbursable contract-related travel and entertainment
expenses of $620,000 and $1.7 million for the quarters ended June 30, 2001 and
2000, respectively, which are separately billed to clients.

In the beginning of the fourth quarter of fiscal 2001, the Company adopted Staff
Accounting Bulletin 101 ("SAB 101"), Revenue Recognition, which was issued by
the Securities and Exchange Commission ("SEC") in December 1999. SAB 101
outlines the basic criteria that must be met to recognize revenue and it
provides guidance for presentation and disclosure of revenue recognition
policies in financial statements filed with the SEC. Adoption of SAB 101 had no
material impact on ADS' reported revenues and results of operations.


                                       6
<PAGE>   7

Earnings Per Share

The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"). FAS 128 requires the presentation of two
amounts, basic earnings per share and diluted earnings per share.

3.       EARNINGS PER SHARE

The following table sets forth the computation of basic earnings per share and
diluted earnings per share for the three months ended June 30, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                                                            JUNE 30,
                                                                    -----------------------
                                                                       2001          2000
                                                                    ---------      --------
                                                                    (in thousands, except
                                                                       per share data)
<S>                                                                 <C>            <C>
Numerator:
Net income (loss) (numerator for basic earnings per share
  and diluted earnings per share)                                   $ (2,723)      $    290
                                                                    --------       --------
Denominator:
Denominator for basic earnings per share - weighted average
  shares                                                              13,023         12,985
Effect of dilutive securities:
     Employee stock options                                             --              249
                                                                    --------       --------
         Denominator for diluted earnings per share - adjusted
           weighted average and assumed conversions                   13,023         13,234
                                                                    --------       --------
Basic earnings per share                                            $  (0.21)      $   0.02
                                                                    ========       ========
Diluted earnings per share                                          $  (0.21)      $   0.02
                                                                    ========       ========
</TABLE>

In addition, as of June 30, 2001, there were options outstanding to purchase
1,422,500 shares that are potentially anti-dilutive.

4.       MAJOR CUSTOMERS

The nature of the Company's services results in the Company deriving significant
amounts of revenue from certain customers in a particular period. For the
quarter ended June 30, 2001, two customers accounted for 46.8% and 16.4% of the
Company's revenues. For the quarter ended June 30, 2000, two customers accounted
for 25.1% and 17.1% of the Company's revenues.

5.       LONG-TERM INVESTMENT

On September 8, 2000, the Company made a $3 million preferred stock investment,
representing a minority interest, in S2 Systems, Inc., a software solution
provider in the banking and diversified financial services markets. The
investment is stated at cost.

6.       INCOME TAXES

In assessing the realizability of net deferred tax assets, management considers
whether it is more likely than not that some portion of the net deferred tax
assets will not be realized in the foreseeable future. The ultimate realization
of net deferred tax assets is dependent upon the generation of future taxable
income during the periods in which temporary differences representing net future
deductible amounts become deductible. As such, management has established a
valuation allowance against the net deferred tax assets at June 30, 2001 to
bring the amount to its estimated realizable value of $174,000.

7.       RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets."

SFAS No. 141 requires that all business combinations be accounted for under the
purchase method and that certain acquired intangible assets in a business
combination be recognized as assets apart from goodwill. SFAS No. 141 is
effective for all business combinations initiated after June 30, 2001 and for
all business combinations accounted for by the purchase method which were
initiated before but completed after June 30, 2001.

SFAS No. 142 requires that ratable amortization of goodwill be replaced with
periodic testing of the goodwill for impairment and that intangible assets other
than goodwill be amortized over their estimated useful lives. The provisions of
SFAS No. 142 will be effective for fiscal years beginning after December 15,
2001. However, early adoption of SFAS 142 will be permitted for companies with a
fiscal year beginning after March 15, 2001, provided their first quarter
financial statements have not been previously issued. The Company has early
adopted SFAS No. 142 as of April 1, 2001. Since the Company had no goodwill or
other intangible assets at the date of adoption there is no effect on prior
period financial results.

                                       7
<PAGE>   8
8.       BUSINESS COMBINATIONS

On June 29, 2001, the Company acquired substantially all of the assets
(including intangibles and goodwill) of Cool Springs Associates, Inc. d/b/a
EarningsInsights ("EarningsInsights") for $2,000,000 in cash and approximately
$637,000 in warrants. EarningsInsights, headquartered in Nashville, Tennessee,
is a private company that implements customer profitability methodologies
exclusively licensed to it by First Manhattan Consulting Group, Inc. ("FMCG")
and incorporates these methodologies into an application service provider
("ASP")-delivered CRM profitability model offered primarily to mid-tier
financial institutions and small banks.

The acquisition has been accounted for under the purchase method and,
accordingly, the purchase price was allocated to assets acquired and liabilities
assumed based on their estimated fair value at June 29, 2001, as follows (in
thousands):

          Property, plant and equipment      $  412
          Other assets                            9
          Intangibles                         1,100
          Goodwill                            1,291
                                             ------
            Total                            $2,812
                                             ======

     The purchase price is comprised of the following (in thousands):

          Cash                               $2,000
          Fair value of warrant                 637
          Assumed liabilities                    25
          Transaction costs                     150
                                             ------
            Total                            $2,812
                                             ------

The unaudited pro forma consolidated information for the three months ended June
30, 2001 and 2000, determined as if the EarningsInsights acquisition had
occurred on April 1 of each period would have resulted in the following:

<TABLE>
<CAPTION>
                                          June 30, 2001              June 30, 2000
                                           (Unaudited)                (Unaudited)
                                    ------------------------    -----------------------
                                    As Reported    Pro Forma    As Reported   Pro Forma
                                    -----------    ---------    -----------   ---------
<S>                                   <C>           <C>           <C>          <C>
Revenues                              $ 4,554       $ 4,577       $ 9,527      $ 9,527
Income (loss) from operations          (2,709)       (3,115)            4         (201)
Net income (loss)                      (2,723)       (3,125)          290          104

Basic earnings (loss) per share       $ (0.21)      $ (0.24)      $  0.02      $  0.01
Diluted earnings (loss) per share       (0.21)        (0.24)         0.02         0.01
</TABLE>

The unaudited pro forma information is presented for illustrative purposes only
and is not necessarily indicative of results of operations in future periods or
results that would have been achieved had the Company and the acquired company
been combined during the specified periods.

The Company is required to pay to EarningsInsights an additional cash payment
within 75 days after the end of each twelve-month period ending on June 29,
2002, June 29, 2003 and June 29, 2004 equal to 50% of the net income (as defined
in the Asset Purchase Agreement) recognized by the Company that is attributable
to the operation of the former business of EarningsInsights by the Company. Such
cash payments will not exceed (i) $100,000 for the period ending on June 29,
2002, (ii) $200,000 for the period ending on June 29, 2003 and (iii) $300,000
for the period ending on June 29, 2004.

9.       ACQUIRED INTANGIBLE ASSETS

The acquired intangible assets were purchased on June 29, 2001, and are being
amortized on a straight-line basis over three years.

                                                   As of June 30, 2001
                                            -------------------------------
                                            Gross Carrying     Accumulated
                                                Amount         Amortization
                                            --------------     ------------
                                                    (in thousands)
Acquired Intangible Assets:
   Purchased technology                        $1,100             $0

Estimated Amortization Expense:
   For the year ended March 31, 2002             $275
   For the year ended March 31, 2003              367
   For the year ended March 31, 2004              367
   For the year ended March 31, 2005               91

10.      GOODWILL

The goodwill acquired during the quarter ended June 30, 2001 was $1,291,000. The
balance as of April 1, 2001 was $0.


                                       8
<PAGE>   9

                          ATLANTIC DATA SERVICES, INC.

                           FORWARD LOOKING STATEMENTS

This Report includes forward-looking statements, which are made pursuant to the
safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
You can identify these forward-looking statements when you see us using words
such as "expect," "anticipate," "believe," "intend," "may," "predict," and other
similar expressions. These forward-looking statements cover, among other items:
events, conditions and financial trends that may affect the Company's future
plans of operation, business strategy, growth of operations and financial
position, including statements regarding revenue and earnings/loss per share
projections, variability of revenues and operating results, intended capital
expenditures for fiscal 2002, impact of recent acquisitions on earnings,
adequacy of capital resources, dependence on the financial services industry,
dependence upon a limited number of customers, decreased utilization rates,
liquidity expectations, variability in revenues from our practice areas and
interest rate risks. Any forward-looking statements are not guarantees of future
performance and are necessarily subject to a number of risks and uncertainties,
some of which are beyond our control. Because of these risks and uncertainties,
the forward-looking events discussed in this Report might not transpire.

ITEM 2:  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

OVERVIEW

ADS provides information technology ("IT") strategy consulting and systems
integration services to the financial services industry. We offer rapid,
cost-effective IT solutions to the business challenges faced by financial
services companies through our in-depth financial services experience,
technological expertise and project management skills. Our service offerings are
organized around four practice areas: e-Business, Customer Relationship
Management ("CRM"), IT Strategy and Consulting, and Conversions and
Consolidations.

Our revenues are derived primarily from professional fees billed to customers on
a time and materials basis, or, in certain instances, on a fixed price basis.
Included in revenues are reimbursable contract-related travel and entertainment
expenses, which are separately billed to customers. Substantially all of our
contracts, other than fixed price contracts, are terminable by the customer
following limited notice and without significant penalty to the customer.
Revenues from fixed price contracts represented approximately 2.6% and 4.0% of
our revenues for the quarters ended June 30, 2001 and 2000, respectively.

We have derived, and expect to continue to derive, a significant portion of our
revenues from a relatively limited number of customers. Revenues from our five
largest customers for the quarters ended June 30, 2001 and 2000 were 82.5% and
67.2%, respectively, as a percentage of revenues. For the quarter ended June
30, 2001, FleetBoston Financial Corporation, Zions Bancorporation, IntraNet,
Inc., a TSA Company, AAL Bank and Trust Co., FSB and Citizens Financial
Corporation accounted for approximately 46.8%, 16.4%, 7.8%, 6.9% and 4.7%,
respectively, of revenues. For the quarter ended June 30, 2000, FleetBoston
Financial Corporation, Citizens Banking Corporation (MI), Brokat Financial
Systems, Hudson United Bank Corporation, Inc. and Corillian Corporation
accounted for approximately 25.1%, 17.1%, 8.9%, 8.2% and 7.8%, respectively, of
revenues.

Cost of revenues consists primarily of salaries and employee benefits for
personnel dedicated to customer assignments, fees paid to subcontractors for
work performed in connection with customer assignments, and reimbursable
contract-related travel and entertainment expenses incurred by us in connection
with the delivery of our services.


                                       9
<PAGE>   10

Sales and marketing expenses consist primarily of salaries, employee benefits,
travel expenses and promotional costs. General and administrative expenses
consist primarily of expenses associated with our management, finance and
administrative groups, including recruiting, training, depreciation and
amortization and occupancy costs.

OUTLOOK

With respect to ADS' earnings projections for the future, we see no near term
thawing of the IT spending freeze in the U.S. Further, in the near term, the
acquisition of EarningsInsights will have a negative impact on earnings.
Consequently, we are estimating our second quarter revenue will be in the $4.5
to $5.5 million range, with a per share net loss in the range of $.13 to $.06.

VARIABILITY OF QUARTERLY OPERATING RESULTS

Variations in our revenues and operating results have occurred from quarter to
quarter and may continue to occur as a result of a number of factors. Quarterly
revenues and operating results can depend on:

-        the number, size and scope of customer projects commenced and completed
         during a quarter,

-        changes in employee utilization rates,

-        changes in average billing rates,

-        the number of working days in a quarter,

-        the timing of introduction of new service offerings, both by us and our
         competitors,

-        changes in pricing, both by us and our competitors,

-        loss of a significant customer,

-        increased competition from our competitors,

-        loss of key personnel,

-        other factors that adversely impact the financial services industry,

-        general economic conditions,

-        potential acquisitions and our ability to successfully integrate the
         acquired business or technologies into our existing business and
         operations, and

-       our ability to develop and introduce new service offerings, improve
        existing service offerings and develop and maintain the skills necessary
        to keep pace with changing technologies.

The timing of revenues is difficult to forecast because our sales cycle is
relatively long, ranging from one to six months for new projects with existing
customers and three to six months for new customers, and may depend on factors
such as the size and scope of projects or other factors that adversely impact
the financial services industry and general economic conditions. In addition,
the relatively long length of our sales cycle may negatively impact the
operating results for any particular quarter as a result of increased sales and
marketing expenses without associated increases in revenues in the particular
quarter. Furthermore, many of our projects are, and may be in the future,
terminable without customer penalty. An unanticipated termination of a major
project or loss of a major customer could require us to maintain or terminate
underutilized employees, resulting in a higher than expected number of
unassigned persons or higher than expected severance expenses.


                                       10
<PAGE>   11

QUARTER ENDED JUNE 30, 2001 COMPARED TO QUARTER ENDED JUNE 30, 2000

REVENUES

Revenues decreased 52.2% for the quarter ended June 30, 2001 over the quarter
ended June 30, 2000, from $9.5 million to $4.6 million. This decrease was
predominately due to a 58.9% decrease in the volume of services delivered to
customers due to the continued IT spending freeze in the U.S., which was
slightly offset by a 22.1% increase in the average billing rate from $113 for
the three months ended June 30, 2000 to $138 for the three months ended June 30,
2001.

COST OF REVENUES

Cost of revenues decreased 43.9% to $3.8 million from $6.7 million for the
quarter ended June 30, 2001 compared to the quarter ended June 30, 2000,
representing 82.5% and 70.2%, respectively, of revenues in each quarter. The
dollar decrease in cost of revenues was primarily due to a decrease in billable
personnel from 160 at June 30, 2000 to 80 at June 30, 2001. The increase in cost
of revenues as a percentage of revenues is due to the aforementioned decrease in
the volume of services delivered to customers.

SALES AND MARKETING

Sales and marketing expenses were $1.0 million for the quarters ended June 30,
2001 and June 30, 2000, representing 21.9% and 10.5% of revenues, respectively.
The increase in sales and marketing expense as a percentage of revenues is due
to the significant reduction in revenue from the prior year.

GENERAL AND ADMINISTRATIVE

General and administrative expenses decreased 13.3% to $1.6 million from $1.8
million for the quarter ended June 30, 2001 compared to the quarter ended June
30, 2000, representing 34.8% and 19.2% of revenues, respectively. The dollar
decrease is primarily due to decreases in compensation and travel expense as a
result of a decrease in the number of administrative personnel from 29 at June
30, 2000 to 19 at June 30, 2001. The increase in general and administrative
expense as a percentage of revenues is due to the significant reduction in
revenue from the prior year.

INTEREST INCOME, NET

Interest income, net decreased $164,000 from $536,000 for the quarter ended June
30, 2000 to $372,000 for the quarter ended June 30, 2001. This decrease was
principally due to interest rate decreases and to lower cash balances.

PROVISION FOR INCOME TAXES

The net provision for income taxes increased $136,000 to $386,000 from $250,000
for the quarter ended June 30, 2001 compared to the quarter ended June 30, 2000.
We have a provision for income taxes even though we have a loss before taxes
because we have established a valuation allowance for our deferred tax assets
that may not be realized in the foreseeable future. Our effective tax rate may
vary from period to period depending on states in which we do business due to
varying state and local statutory income tax rates and depending on our levels
of profitability.


                                       11
<PAGE>   12

LIQUIDITY AND CAPITAL RESOURCES

We have no long-term debt and continue to operate primarily debt-free. Working
capital was $32.4 million at June 30, 2001. Our days sales in accounts
receivable at June 30, 2001 was 43 compared to 60 days at June 30, 2000. While
we believe that the risk with respect to collection of accounts receivable is
minimized by the creditworthiness of our customers, primarily banks and other
financial institutions, and because of our credit and collection policies, there
can be no assurance that we will not encounter collection problems in the
future. We attempt to further minimize this risk by performing ongoing credit
valuations of our customers and maintaining an allowance for potential credit
losses. We believe that our allowance for doubtful accounts and collection
policies are adequate.

We acquired $412,000 of fixed assets pursuant to the asset purchase agreement
with EarningsInsights. Capital expenditures for the remainder of fiscal 2002 are
expected to be approximately $400,000 and will be used principally for computers
and other equipment.

On June 29, 2001, we acquired substantially all of the assets of Cool Springs
Associates, Inc. d/b/a EarningsInsights, pursuant to an asset purchase agreement
by and among us, EarningsInsights and certain stockholders of EarningsInsights.
The purchase price for the acquisition consisted of a $2 million cash payment
and the issuance by us of a warrant to purchase 300,000 shares of our common
stock at exercise price of $5.08 per share. We paid the cash portion of the
consideration for the acquired assets from our working capital.

We are required to pay to EarningsInsights an additional cash payment within 75
days after the end of each twelve-month period ending on June 29, 2002, June 29,
2003 and June 29, 2004 equal to 50% of the net income (as defined in the Asset
Purchase Agreement) recognized by the Company that is attributable to the
operation of the former business of EarningsInsights by the Company. Such cash
payments will not exceed (i) $100,000 for the period ending on June 29, 2002,
(ii) $200,000 for the period ending on June 29, 2003 and (iii) $300,000 for the
period ending on June 29, 2004.

In the near term, we expect that the acquisition of EarningsInsights will have a
negative impact on earnings.

We expect that existing cash and cash equivalent balances, together with cash
which may be provided from operations, will be sufficient to meet the Company's
working capital and capital expenditure requirements for at least the next
twelve months.

To date, inflation has not had a material impact on the Company's financial
results.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets."

SFAS No. 141 requires that all business combinations be accounted for under the
purchase method and that certain acquired intangible assets in a business
combination be recognized as assets apart from goodwill. SFAS No. 141 is
effective for all business combinations initiated after June 30, 2001 and for
all business combinations accounted for by the purchase method which were
initiated before but completed after June 30, 2001.

SFAS No. 142 requires that ratable amortization of goodwill be replaced with
periodic testing of the goodwill for impairment and that intangible assets other
than goodwill be amortized over their estimated useful lives. The provisions of
SFAS No. 142 will be effective for fiscal years beginning after December 15,
2001. However, early adoption of SFAS 142 will be permitted for companies with a
fiscal year beginning after March 15, 2001, provided their first quarter
financial statements have not been previously issued. The Company has early
adopted SFAS 142 at the beginning of its current fiscal year. The Company
anticipates that the early adoption of this pronouncement has no material impact
on the Company's financial statements.

ITEM 3:  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates due to investments
in instruments made for non-trading purposes. The interest rate risk relates
primarily to our portfolio of short-term investment grade securities. As of June
30, 2001 we did not, nor do we intend to, use derivative financial instruments
for speculative trading purposes.

The majority of our sales are denominated in U.S. dollars and take place in
North America.

We believe that interest rate risk and foreign currency exchange rate risks are
both immaterial to the Company.


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<PAGE>   13

                                     PART II

                                OTHER INFORMATION

ITEM 2:    CHANGES IN SECURITIES AND USE OF PROCEEDS

           (d)   Recent Sales of Unregistered Securities

                 On June 29, 2001, as partial consideration for our acquisition
of substantially all the assets of Cool Springs Associates, Inc. d/b/a
EarningsInsights ("EarningsInsights"), we issued a warrant to purchase 300,000
shares of our common stock at an exercise price of $5.08 per share to
EarningsInsights (the "Warrant"), pursuant to the terms of an asset purchase
agreement among us, EarningsInsights and certain stockholders of
EarningsInsights. The Warrant is immediately exercisable and may be exercised
through June 29, 2008. The amount of common stock issuable upon exercise of the
Warrant is subject to adjustment for stock dividends or subdivision or
combination of our common stock. The estimated value of the warrant is
approximately $637,000. The Warrant is exempt from registration under the
Securities Act of 1933, as amended (the "Act"), pursuant to Rule 504 and/or Rule
506 promulgated thereunder, since the aggregate offering price of the Warrant
does not exceed $1,000,000 and/or EarningsInsights is the sole purchaser and
qualifies as an "accredited investor" under Rule 506 of the Act.

ITEM 6:    EXHIBITS AND REPORTS ON FORM 8-K

           (a)   Exhibits

                 None.

           (b)   Reports on Form 8-K

                 On July 12, 2001, the Company filed a Form 8-K with the
Securities and Exchange Commission announcing the acquisition of Cool Springs
Associates, Inc. d/b/a EarningsInsights.

                 On August 10, 2001, the Company filed a Form 8-K/A with the
Securities and Exchange Commission to amend Items 2 and 7 of the Form 8-K filed
on July 12, 2001.

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<PAGE>   14

                                   SIGNATURES

Pursuant to the requirement 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.



                                  ATLANTIC DATA SERVICES, INC.



Date:  August 14, 2001            By: /s/ Robert W. Howe
                                  ------------------------------------
                                  Robert W. Howe
                                  Chairman and Chief Executive Officer


Date:  August 14, 2001            By: /s/ Paul K. McGrath
                                  ------------------------------------
                                  Paul K. McGrath
                                  Senior Vice President and Chief Financial
                                  Officer (Principal Financial and Accounting
                                  Officer)


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