SECURITIES AND EXCHANGE COMMISSION
                                Washington, DC 20549


                                     FORM 10-Q

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


For the quarterly period ended    MARCH 31, 1997

                                      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:   0-25590


                           DATASTREAM SYSTEMS, INC.
            (Exact name of Registrant as specified in Its Charter)

DELAWARE                                              57-0813674
(State of Incorporation)                     (IRS Employer Identification No.)

50 DATASTREAM PLAZA, GREENVILLE, SC         29605            
(address of principle executive offices)    (Zip Code)

(Telephone number of registrant)        (864) 422-5000

                                  Not Applicable
            (Former Name, Former Address, 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

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
of the issuer's common stock as of the latest practicable date: March 31, 1997 -
9,151,095 shares, $0.01 par value.



<PAGE>





                               Datastream Systems, Inc.

                                      FORM 10-Q

                             Quarter ended March 31, 1997

                                        Index
                                                               Page No.

Part I.     Consolidated Financial Information

Item 1.     Consolidated Financial Statements (unaudited)

            Consolidated Balance Sheet-  March 31, 1997
                 Assets                                                     3
                 Liabilities and Owners Equity                              4

            Consolidated Income Statement -
                 for the Three Months ended March 31, 1997                  5

            Consolidated Statement of Changes in Stockholders Equity -
                 for the Three Months ended March 31, 1997                  6

            Consolidated Statement of Cash Flows -
                 for the Three Months ended March 31, 1997                  7

            Notes to the Consolidated Financial Statements                  8

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

Item 3.     Quantitative and Qualitative Disclosures About
            Market Risk
 

Part II.    Other Information                                              13


Signature                                                                  14





<PAGE>



PART I.  CONSOLIDATED FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements

                        Datastream Systems, Inc. and Subsidiaries

                               Consolidated Balance Sheets

                                         Assets

                                                       December 31,    March 31,
                                                             1996         1997
                                                                     (unaudited)
Current assets:
   Cash and cash equivalents                            $ 6,315,719  $ 2,954,591
   Accounts receivable, net of allowance 
      for doubtful accounts of $835,000 
      and $835,000, respectively                         11,725,928   14,643,949
   Investments held to maturity                          13,011,856   10,981,553
   Accrued interest receivable                              221,827       85,960
   Prepaid expenses                                         586,647      835,258
   Inventories                                              324,018      269,353
   Deferred income taxes                                    395,000      395,000
   Other assets                                           1,961,496    2,546,185
         Total current assets                            34,542,491   32,711,849

Investments held to maturity                              4,547,220    4,548,423
Property and equipment
   Land                                                     465,981      465,981
   Building                                               4,371,113    4,345,348
   Computer equipment                                     4,719,340    5,250,372
   Furniture and fixtures                                   930,226    1,172,053
                                                         10,486,660   11,233,754
   Less accumulated depreciation                          1,794,337    2,228,284
         Net property and equipment                       8,692,323    9,005,470

Goodwill                                                  7,636,748    7,364,260

Capitalized software development costs, 
   net of accumulated amortization of 
   $1,197,177 and $1,526,600, respectively                2,158,436    2,166,571

         Total assets                                  $ 57,577,218 $ 55,796,573

See notes to Consolidated Financial Statements





                        Datastream Systems, Inc. and Subsidiaries

                         Consolidated Balance Sheets (Continued)

                          Liabilities and Stockholders' Equity

                                                        December 31,   March 31,
                                                           1996           1997
                                                                     (unaudited)
Current liabilities:
   Accounts payable                                     $ 4,403,205  $ 3,283,308
   Other accrued liabilities                              9,139,078    6,626,934
   Income taxes payable                                     743,707      977,175
   Current portion of long-term debt                      1,507,274      263,417
   Unearned revenue                                       5,116,007    7,176,708
         Total current liabilities                       20,909,271   18,327,542
Long-term debt, less current portion                      2,892,743    1,229,331
Deferred income taxes                                       650,000      650,000

         Total liabilities                               24,452,014   20,206,873

Stockholders' equity:
   Preferred stock, $1 par value, 1,000,000 
      shares authorized; none outstanding                        -           -
   Common stock, $.01 par value, 15,000,000 shares
      authorized; 9,126,789 shares issued and 
      outstanding at December 31, 1996; 9,151,095           
      shares issued and outstanding at March 31, 1997        91,268       91,406
   Additional paid-in capital                            55,832,034   55,944,523
   Foreign currency translation adjustment                       -       373,672
   Retained earnings                                    (22,798,098)(20,819,901)

         Total stockholders' equity                      33,125,204   35,589,700

         Total liabilities and stockholders' equity     $57,577,218  $55,796,573

See Notes to Consolidated Financial Statements



<PAGE>


                      Datastream Systems, Inc. and Subsidiaries

                          Consolidated Statements of Income
                      Three months ended March 31, 1996 and 1997
                                      (unaudited)

                                                          March 31,   March 31,
                                                             1996        1997

Revenues:
   Product                                              $ 3,072,710  $ 6,148,014
   Applications engineering                               2,488,643    5,783,723
   Support                                                1,340,090    2,750,674
         Total revenues                                   6,901,443   14,682,411

Cost of revenues:
   Cost of product revenues                                 362,463      843,963
   Cost of applications engineering revenues              1,176,031    3,529,973
   Cost of support revenues                                 264,484      687,272
         Total cost of revenues                           1,802,978    5,061,208

      Gross profit                                        5,098,465    9,621,203

Operating expenses:
   Sales and marketing                                    2,127,715    4,273,471
   Product development                                      417,071      834,048
   General and administrative                               627,721    2,235,040
               Total operating expenses                   3,172,507    7,342,559

      Operating income                                    1,925,958    2,278,644

Other income (expense):
   Interest income                                          576,138      262,510
   Interest expense                                           (894)    (102,449)
   Other                                                        715       47,279
      Net other income                                      575,959      207,340

      Income before income taxes                          2,501,917    2,485,984

Income taxes                                                963,000      507,787

      Net income                                        $ 1,538,917  $ 1,978,197

Per share data:
   Net income                                             $     .18    $     .21

   Weighted average number of common and
            common equivalent shares outstanding          8,724,003    9,383,985
See Notes to Consolidated Financial Statements



<PAGE>



                      Datastream Systems, Inc. and Subsidiaries

               Consoldiated Statement of Changes in Shareholders' Equity
                          For the period ended March 31, 1997
                                      (unaudited)

                                                       Foreign
                                  Additional           Currency       Total
                         Common   Paid-In   Retained  Translations Stockholders'
                          Stock   Capital   Earnings   Adjustment      Equity


Balance at 
  December 31, 1996  $ 91,268  $55,832,034  $(22,798,098) $    -     $33,125,204

  Net income               -            -      1,978,197       -       1,978,197

  Stock options 
    exercised             138      112,489            -        -         112,627

  Foreign currency 
    translations           -            -             -     372,672      372,672

Balance at 
  December 31, 1996  $ 91,406  $55,944,523  $(20,819,901) $ 372,672  $35,588,700

See Notes to Consolidated Financial Statements





<PAGE>


                               Datastream Systems, Inc.
                         Consolidated Statements of Cash Flows
                 Three months ended March 31, 1996 and March 31, 1997
                                      (unaudited)
                                                          March 31,   March 31,
                                                             1996        1997
Cash flows from operating activities:
   Net income                                           $ 1,538,917  $ 1,978,198
   Adjustments to reconcile net income to net cash
      provided by operating activities: 
         Depreciation                                       129,710      458,577
         Amortization of capitalized software
            development costs                               114,766      275,203
         Amortization of goodwill                                -       272,750
         Foreign currency translation adjustment                 -       373,672
         (Gain) Loss on disposal of fixed assets                 -        53,420
         Provision for doubtful accounts                     30,525           -
         Changes in operating assets and liabilities:
            Accounts receivable                           (557,131)  (2,918,021)
            Accrued interest receivable                      78,317      135,867
            Prepaid expenses                               (48,081)    (248,611)
            Inventories                                      12,422       54,665
            Other assets                                   (22,881)    (584,689)
            Accounts payable                                123,220  (1,120,244)
            Other accrued liabilities                      (59,635)  (2,511,796)
            Income taxes payable                            505,000      233,467
            Unearned revenue                                577,521    2,060,701
               Net cash provided by 
                 operating activities                     2,422,670  (1,486,841)
Cash flows from investing activities:
   Proceeds from investment                                      -     2,045,000
   Additions to property and equipment                  (1,031,067)    (832,569)
   Capitalized software development costs                 (332,348)    (292,076)
               Net cash used in investing               (1,363,415)      920,355

Cash flows from financing activities:
   Proceeds from exercise of stock options                  315,150      112,627
   Principal payments on long-term debt                     (5,000)  (2,907,269)
               Net cash provided by (used in) 
                 financing activities                       310,150  (2,794,642)

Net increase (decrease) in cash and cash equivalents      1,369,405  (3,361,128)
Cash and cash equivalents at beginning of period          1,184,092    6,315,719

Cash and cash equivalents at end of period              $ 2,553,497  $ 2,954,591
See Notes to Consolidated Financial Statements




<PAGE>







                    Datastream Systems, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements



1)  Summary of significant Accounting Policies

A. Organization and Basis of Presentation

Datastream  Systems,  Inc. (the "Company" or  "Datastream")  develops,  markets,
sells and supports  Microsoft  Windows-based  personal computer software for the
industrial  automation market.  Datastream's  software enables users to schedule
preventive  maintenance,  record equipment maintenance  histories,  organize and
control  spare  parts  inventories,   schedule  equipment  and  parts  inventory
purchases and deploy maintenance personnel.  In addition to its U.S. operations,
the  Company has direct  sales or  distribution  offices in the United  Kingdom,
Latin America, Malaysia, Australia and South Africa.

On December  31,  1996,  the  Company  acquired  SQL Group,  B.V.  ("SQL").  The
acquisition has been accounted for using the purchase method. The purchase price
has been  allocated to the  tangible and  intangible  assets  purchased  and the
liabilities assumed based on the fair values on the date of acquisition.

The  interim  financial  information  included  herein  is  unaudited.   Certain
information  and  footnote   disclosures  normally  included  in  the  financial
statements have been condensed or omitted  pursuant to the rules and regulations
of the Securities and Exchange  Commission (SEC),  although the Company believes
that the  disclosures  made are adequate to make the  information  presented not
misleading.   These  consolidated   financial   statements  should  be  read  in
conjunction  with  the  consolidated  financial  statements  and  related  notes
contained in the Company's Form 10-K filed with the SEC on April 15, 1997. Other
than as  indicated  herein,  there  have been no  significant  changes  from the
financial  data  published in that report.  In the opinion of  management,  such
unaudited  information  reflects  all  adjustments,  consisting  only of  normal
recurring  accruals and other adjustments as disclosed  herein,  necessary for a
fair presentation of the unaudited information.

Results for interim periods are not necessarily  indicative of results  expected
for the full year.


B.  Accounting Policies

Net income per share

Net income per share is computed by dividing net income by the weighted  average
number of common and common  equivalent  shares  outstanding.  Weighted  average
common and common equivalent shares include

                    Datastream Systems, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

common shares,  stock options using the treasury  stock method,  and the assumed
exercise price of the outstanding warrants to purchase common stock.


C.  Public Offering of Common Stock

On April 5, 1995, the Company  closed its initial  public  offering of 1,633,000
shares of common stock (633,000 of which were sold by existing shareholders) for
$15.00 per share before giving effect to the two for one stock split referred to
in  the  following   paragraph.   The  Company  invested  the  net  proceeds  of
approximately $13.95M from the offering in U.S. Government securities.

Effective  September  12, 1995 the  Company  completed a two for one stock split
effected in the form of a stock  dividend.  All  references in the  accompanying
consolidated financial statements to the number of shares have been presented to
reflect this stock split.

On  October  3, 1995,  the  Company  closed its  secondary  public  offering  of
2,000,000  shares of common stock for $22.25 per share (1,085,670 of such shares
were sold by existing  shareholders).  The Company  invested the net proceeds of
approximately $19.12 million from the offering in U.S. Government securities. In
conjunction with the secondary offering, on October 17, 1995, the Company closed
on the  over-allotment  option of 300,000  shares of common  stock.  The Company
invested the net proceeds of approximately $6.28 million from the over-allotment
option in U.S. Government securities.


<PAGE>


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


This report  contains  certain  forward-looking  statements  with respect to the
Company's  operations,   industry,  financial  condition  and  liquidity.  These
statements   reflect  the  Company's   assessment  of  a  number  of  risks  and
uncertainties.  The Company's  actual results could differ  materially  from the
results anticipated in these  forward-looking  statements as a result of certain
factors set forth in this report.

Overview

     The  Company  offers  a  family  of  "computerized  maintenance  management
systems"  ("CMMS") to the maintenance,  repair and operations  ("MRO") industry,
including  MP2 (DOS),  SideArm  for  Windows,  MP2 for  Windows,  MP2 for Client
Server,  MP2 Pro,  MP2  Enterprise,  MaintainIt,  Maintainit  Pro and R5  CAMMS.
Datastream  supports  its software  products  through  applications  engineering
services, including installation,  consulting,  integration,  custom programming
and  training.  Ongoing  technical  support  services are  supplied  pursuant to
renewable annual technical support contracts.

     Financial information  for the first quarter of 1997 include the operations
of Datastream and its European  subsidiary,  SQL Group, B. V. ("SQL"), which was
acquired December 31, 1996.  SQL's financial results from 1996 are not included.

Results of Operations

     Total Revenues.  The Company reported higher revenues for the first quarter
of 1997. Total revenues  increased 112.7% to $14,682,411 in the first quarter of
1997 from  $6,901,443  in the first  quarter  of 1996,  due  principally  to the
acquisition  of SQL, the continued  acceptance of the Company's  products in the
industrial   automation  market  and  the  expansion  of  the  Company's  sales,
applications   engineering  and  technical  support  service  organizations.  

     Product revenues  increased 100.1% to $6,148,014  (41.9% of total revenues)
in the first  quarter of 1997 from  $3,072,710  (44.5%) in the first  quarter of
1996, as a result of the addition of new products  including MP2  Enterprise and
Maintain  It Pro,  the  growth  in  international  sales  and the  impact of the
acquisition of SQL.

     Application  engineering  services revenues  increased 132.4% to $5,783,723
(39.4% of total revenues) in the first quarter of 1997 from  $2,488,643  (36.1%)
in  the  first  quarter  1996.  The  increase  resulted  from  the  addition  of
application   engineering  personnel  to  service  expansion  of  the  Company's
installed base of systems and the acquisition of SQL.

     Technical  support  services  revenues for the first quarter 1997 increased
105.3% to $2,750,674  (18.7% of revenues) from  $1,340,090  (19.4%) in the first
quarter of 1996,  primarily due to the expansion of the Company's installed base
of systems and the acquisition of SQL.

     Cost of Revenues. Cost of revenues increased 180.7% to $5,061,208 (34.5% of
total revenues) in the first quarter of 1997, as compared to $1,802,978  (26.1%)
in the  comparable  quarter  of 1996.  The  increase  in cost of  revenues  as a
percentage  of  sales  is  attributed  to  increased  expenses  incurred  in the
Applications  Engineering Department related to salaries and customer reimbursed
travel,  increased costs of technical support and as a result of the acquisition
of SQL.

     Cost of product  revenues  was 5.7% of total  revenues  in the first  three
months of 1997, and 5.3% of total  revenues  during the same period of 1996. The
increase is due to increased  amortization  of  capitalized  software  costs and
increased shipping costs.

     Cost of  application  engineering  services  revenues  was  24.0%  of total
revenues  during the first  three  months of 1997,  and 17.0% of total  revenues
during the same period in 1996.  The increase as a percentage of total  revenues
was due to increased personnel and customer reimbursed travel costs.

     Cost of  technical  support  service  revenues  was 4.7% of total  revenues
during  the first  quarter  of 1997 and 3.8% of total  revenues  during the same
period in 1996. The increase in cost of technical support services resulted from
costs associated with supporting the Company's expanded  international  customer
base.

     Sales and Marketing Expenses. Sales and marketing expenses increased 100.8%
to $4,273,471  (29.1% of total  revenues)  during the first quarter of 1997 from
$2,127,715 (30.8%) during the first quarter in 1996, as a result of an increased
number of sales  personnel,  commissions  associated  with the increase in sales
revenue  and  increased   marketing   expenses   associated   with  new  product
introductions.

     Product  Development  Expenses.   Total  product  development  expenditures
increased  100.0% to $834,048 (5.7% of total revenues)  during the first quarter
of 1997 from  $417,071  (6.0%) during the same period in 1996.  The  capitalized
portion of these amounts were $292,075 and $332,348, respectively. Giving effect
to  amounts   capitalized,   product  development  expense  increased  50.3%  to
$1,126,123  (7.7%) in the first quarter of 1997 from $749,419 (10.9%) during the
same period in 1996. The increase in product  development  expense resulted from
increasing the number of development  personnel to support continued development
of new products.

     General and Administrative  Expenses.  General and administrative  expenses
increased  256.1% to  $2,235,040  (15.2%  of total  revenues)  during  the first
quarter of 1997 from $627,721 (9.1%) in the first quarter of 1996, primarily due
to increased salary expense resulting from the acquisition of SQL.

     Miscellaneous  Income.  Miscellaneous  income  for the quarter increased to
$47,279 in the first quarter of 1996 from $715 in the first quarter of 1996. The
increase is primarily due to income realized from the rental of a portion of the
Company's building in Greenville, South Carolina.

     Interest  Income/(Expense).  Interest  income  decreased to $262,510 in the
first quarter of 1997 from  $576,138 in the first quarter of 1996,  due to lower
investment balances realized upon completion of the Company's acquisition of SQL
in December 1996.  Interest expense  increased to $102,449 for the first quarter
of 1997 from $894 in the first quarter of 1996 due to the increased debt assumed
in the SQL acquisition.

     Tax Rate. The Company's  effective tax rate was 20.4% for the first quarter
of 1997 as compared to 38.5% for the first  quarter of 1996.  The lower tax rate
was due to a one-time  benefit for certain items relating to the  acquisition of
SQL.

     Net  Income.  Net  income  increased  28.5% to  $1,978,198  (13.5% of total
revenues)  in the first  quarter  of 1997 from  $1,538,917  (22.3%) in the first
quarter of 1996.


<PAGE>


Liquidity and Capital Resources

     The Company has funded its  activities  entirely  from cash  generated from
operations.  The Company ended its first quarter of 1997 with $2,954,591 in cash
and cash  equivalents defined as securities  maturing in less than 90 days.  The
Company   intends  to  re-invest  the  proceeds  of  maturing  U.  S. Government
securities in similar U. S. Government securities.


     The  acquisition of SQL was completed for $31 million,  $17 million in cash
and $14 million in stock issued pursuant to Regulation S. In connection with the
acquisition,  the Company also deposited into escrow an additional $3 million in
stock,  and assumed  certain of SQL's  outstanding  liabilities.  Following  the
acquisition,  SQL long-term debt totaling  approximately $2.7 million was repaid
by the Company and additional  working capital  infusions of approximately  $2.5
million were required to sustain SQL's  operations and pay current  liabilities.
Approximately   $1.7  million  of  SQL's   long-term  debt  remains,   of  which
approximately $800,000 is scheduled to be repaid by the end of 1997.


      The  Company's  principal  commitments  as of March  31,  1997,  consisted
primarily of long term debt assumed in the acquisition of SQL Systems, and there
were no material commitments for capital expenditures. The Company completed its
initial public  offering in April 1995,  raising  proceeds,  net of underwriting
discounts and  commission  (but before payment of other expenses of $389,787) of
$13,950,000.  Proceeds  from  the  offering  were  invested  in U.S.  Government
securities. The Company completed its secondary public offering in October 1995,
raising  proceeds,  net of  underwriting  discounts and  commission  (but before
payment  of other  expenses  of  $255,064)  of  $25,400,000.  Proceeds  from the
offering were invested in U.S. Government securities.  The Company believes that
its current cash balances, availability under its line of credit, cash flow from
operations and the proceeds of the Company's most recent public offering will be
sufficient  to meet its working  capital and  capital  expenditure  needs for at
least the next 12 months.


ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk


            Not Applicable

<PAGE>


PART II.     OTHER INFORMATION


Item 1.  Legal Proceedings

            Not Applicable

Item 2.      Changes in Securities

            Not Applicable

Item 3.      Defaults Upon Senior Securities

            Not Applicable

Item 4.      Submission of Matters to a Vote of Stockholders

            Not Applicable

Item 5.      Other Information

            Not Applicable

Item 6.      Exhibits and Reports on Form 8-K

            a)    Reports on Form 8-K

            b)    Exhibits

                  27    Financial Data Schedule




<PAGE>


a)    Form 8-K:

The Company  filed a Current  Report on Form 8-K on January 10, 1997, as amended
by Amendment  No. 1 on Form 8-K/A filed March 18, 1997,  to report the Company's
acquisition of all of the capital sotck and equity  interests of SQL on December
31, 1996.

      1)    Financial Statements of Businesses Acquired

      The  following  financial  statements of SQL were filed with the Company's
      Current Report on Form 8-K:

            SQL Systems Group Annual Report

            Director's Report

            Consolidated balance sheet as of December 31, 1996

            Consolidated statement of earnings for the year  ended  December 31,
            1996 and 1995

            Notes to the consolidated Balance sheet and statement of earnings

            Parent company balance sheet as of December 31, 1996

            Parent company statement of operations for 1996

            Notes to the parent company balance sheet

            Allocation of result

            Report of Deloitte & Touche, Registered Accountants

            United States Generally Accepted Accounting Principles (US GAAP)
            reconciliation

      2)    Pro Forma Financial Information:

      The following pro forma financial information was filed with the Company's
      Current Report on 8-K:

            Pro Forma Combined Balance Sheet as of September 30, 1996

            Pro Forma Combined Statement of Operations for the year ended 
            December 31, 1995

            Pro Forma Combined Statement of Operations for nine months ended
            September 30, 1996

            Notes to Pro Forma Combined Financial Statements

<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.



                            Datastream Systems, Inc.


                                    /s/   Daniel H. Christie
Date:   05/15/97                    ______________________
                                    Daniel H. Christie
                                    Chief Financial Officer
                                    (principal financial and
                                    accounting officer)