<PAGE>

--------------------------------------------------------------------------------

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                            ______________________

                                   FORM 10-Q

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

                  For the Quarterly Period Ended May 31, 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 0-16006

                              COGNOS INCORPORATED
            (Exact Name Of Registrant As Specified In Its Charter)

                CANADA                                   98-0119485
  (State Or Other Jurisdiction Of            (IRS Employer Identification No.)
   Incorporation Or Organization)

            3755 Riverside Drive,
          P.O. Box 9707, Station T,
           Ottawa, Ontario, Canada                          K1G 4K9
   (Address Of Principal Executive Offices)               (Zip Code)

                                (613) 738-1440
             (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 ___
                                       ---

The number of shares outstanding of the registrant's only class of Common Stock
as of June 30, 2001, was 88,584,699.

--------------------------------------------------------------------------------

                                       1
<PAGE>

                              COGNOS INCORPORATED

                                     INDEX
<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
                        PART I - FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements

          Consolidated Statements of Income for the three months
            ended May 31, 2001 and May 31, 2000..........................................   3

          Consolidated Balance Sheets as of May 31, 2001
            and February 28, 2001........................................................   4

          Consolidated Statements of Cash Flows for the three months
            ended May 31, 2001 and May 31, 2000..........................................   5

          Condensed Notes to the Consolidated Financial Statements.......................   6

Item 2.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations....................................................  11

Item 3.   Quantitative and Qualitative Disclosure about Market Risk......................  20


                         PART II - OTHER INFORMATION

Item 1.   Legal Proceedings..............................................................  21

Item 6.   Exhibits and Reports on Form 8-K...............................................  21

Signature ...............................................................................  22
</TABLE>

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
------------------------------

Item 1.  Consolidated Financial Statements


                       CONSOLIDATED STATEMENTS OF INCOME
                   (US$000s except share amounts, U.S. GAAP)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                            Three months ended May 31,
                                                                                    2001         2000
------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>
Revenue
   Product license                                                              $  43,104    $  56,733
   Product support                                                                 41,843       33,283
   Services                                                                        23,069       18,682
------------------------------------------------------------------------------------------------------
Total revenue                                                                     108,016      108,698
------------------------------------------------------------------------------------------------------

Operating expenses
   Cost of product license                                                          1,106        1,729
   Cost of product support                                                          4,294        4,274
   Selling, general, and administrative                                            88,873       72,625
   Research and development                                                        19,422       15,854
   Business restructuring charges                                                  12,798           --
------------------------------------------------------------------------------------------------------
Total operating expenses                                                          126,493       94,482
------------------------------------------------------------------------------------------------------

Operating income (loss)                                                           (18,477)      14,216
Interest expense                                                                      (84)        (154)
Interest income                                                                     2,812        2,582
------------------------------------------------------------------------------------------------------

Income (loss) before taxes                                                        (15,749)      16,644
Income tax provision (benefit)                                                     (4,647)       4,660
------------------------------------------------------------------------------------------------------

Net income (loss)                                                               $ (11,102)   $  11,984
======================================================================================================

Net income (loss) per share
   Basic                                                                        $   (0.13)   $    0.14
======================================================================================================

   Diluted                                                                      $   (0.13)   $    0.13
======================================================================================================

Weighted average number of shares (000s)
   Basic                                                                           88,023       86,993
======================================================================================================

   Diluted                                                                         88,023       91,527
======================================================================================================
</TABLE>

                           (See accompanying notes)

                                       3
<PAGE>

                           CONSOLIDATED BALANCE SHEETS

                              (US$000s, U.S. GAAP)

<TABLE>
<CAPTION>
                                                                           May 31, February 28,
                                                                             2001         2001
------------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>
Assets                                                               (Unaudited)

Current assets
  Cash and cash equivalents                                             $ 177,775    $ 115,293
  Short-term investments                                                   61,652      119,265
  Accounts receivable                                                     100,370      146,867
  Inventories                                                                 567          730
  Prepaid expenses                                                          6,966        8,648
  Income tax assets                                                         8,392           --
----------------------------------------------------------------------------------------------
                                                                          355,722      390,803
Fixed assets                                                               74,462       74,208
Other assets                                                               28,141       30,581
----------------------------------------------------------------------------------------------

                                                                        $ 458,325    $ 495,592
==============================================================================================

Liabilities

Current liabilities
  Accounts payable                                                      $  18,413    $  28,256
  Accrued charges                                                          27,540       21,798
  Salaries, commissions, and related items                                 29,110       28,822
  Income taxes payable                                                      1,316       17,548
  Current portion of long-term debt                                            32           32
  Deferred revenue                                                         87,578       96,674
----------------------------------------------------------------------------------------------
                                                                          163,989      193,130
Long-term liabilities                                                       1,590        1,539
Deferred income taxes                                                      10,043       10,394
----------------------------------------------------------------------------------------------
                                                                          175,622      205,063
----------------------------------------------------------------------------------------------

Stockholders' Equity

Capital stock

  Common shares   (May 31, 2001 - 88,205,258;
                   February 28, 2001 - 87,885,161)                        138,937      134,791
Retained earnings                                                         154,653      165,755
Accumulated other comprehensive income                                    (10,887)     (10,017)
----------------------------------------------------------------------------------------------

                                                                          282,703      290,529
----------------------------------------------------------------------------------------------

                                                                        $ 458,325    $ 495,592
==============================================================================================
</TABLE>

                            (See accompanying notes)

                                       4
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (US$000s, U.S. GAAP)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                            Three Months ended
                                                                                                  May 31,
----------------------------------------------------------------------------------------------------------------
                                                                                             2001        2000
----------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>        <C>
Cash provided by (used in) operating activities
   Net income (loss)                                                                      $ (11,102)   $  11,984
   Non-cash items
     Depreciation and amortization                                                            7,158        5,047
     Amortization of deferred stock-based compensation                                          577          173
     Amortization of other deferred compensation                                                666          345
     Deferred income taxes                                                                     (227)           4
     Loss on disposal of fixed assets                                                           215          194
----------------------------------------------------------------------------------------------------------------
                                                                                             (2,713)      17,747
   Change in non-cash working capital
     Decrease in accounts receivable                                                         46,163       14,633
     Decrease in inventories                                                                    153           97
     Decrease (increase) in prepaid expenses                                                  1,499       (1,998)
     Increase in income tax assets                                                           (8,392)          --
     Decrease in accounts payable                                                           (11,388)        (775)
     Increase in accrued charges                                                              6,158          747
     Increase (decrease) in salaries, commissions, and related items                            819       (4,315)
     Increase (decrease) in income taxes payable                                            (16,131)         739
     Decrease in deferred revenue                                                            (7,460)      (2,928)
----------------------------------------------------------------------------------------------------------------
                                                                                              8,708       23,947
----------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities
   Maturity of short-term investments                                                       118,336       64,566
   Purchase of short-term investments                                                       (60,606)     (32,861)
   Additions to fixed assets                                                                 (6,813)     (13,944)
----------------------------------------------------------------------------------------------------------------
                                                                                             50,917       17,761
----------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities
   Issue of common shares                                                                     3,569        9,003
   Repayment of long-term debt and long-term liabilities                                         96          251
----------------------------------------------------------------------------------------------------------------
                                                                                              3,665        9,254
----------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash                                                        (808)      (1,064)
----------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                                    62,482       49,898

Cash and cash equivalents, beginning of period                                              115,293      132,435
----------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                                    177,775      182,333
Short-term investments, end of period                                                        61,652       31,662
----------------------------------------------------------------------------------------------------------------

Cash, cash equivalents, and short-term investments, end of period                         $ 239,427    $ 213,995
================================================================================================================
</TABLE>

                           (See accompanying notes)

                                       5
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
        (All amounts in United States dollars, unless otherwise stated)
                        (In accordance with U.S. GAAP)

1    Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
     prepared by the Corporation in United States (U.S.) dollars and in
     accordance with generally accepted accounting principles (GAAP) in the U.S.
     with respect to interim financial statements, applied on a consistent
     basis. Accordingly, they do not include all of the information and
     footnotes required for compliance with GAAP in the U.S. for annual
     financial statements. These unaudited condensed notes to the consolidated
     financial statements should be read in conjunction with the audited
     financial statements and notes included in the Corporation's Annual Report
     for the fiscal year ended February 28, 2001.

     The preparation of these unaudited consolidated financial statements
     requires management to make estimates and assumptions that affect the
     amounts reported in the consolidated financial statements and the
     accompanying notes. In the opinion of Management, these unaudited
     consolidated financial statements reflect all adjustments (which include
     only normal, recurring adjustments) necessary to state fairly the results
     for the periods presented. Actual results could differ from these estimates
     and the operating results for the interim periods presented are not
     necessarily indicative of the results expected for the full year.

     All information is presented in U.S. dollars, unless otherwise stated.


2.   Accounting Change

     Derivative financial instruments

     Effective March 1, 2001, Cognos adopted Statement of Financial Accounting
     Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
     Hedging Activities" ("SFAS 133") and the corresponding amendments under
     SFAS No.138 "Accounting for Certain Derivative Instruments and Certain
     Hedging Activities-an amendment to SFAS No.133". SFAS 133 requires that all
     derivatives, whether designated in hedging relationships or not, are to be
     recorded on the balance sheet at fair value. If the derivative is
     designated as a fair value hedge, the changes in the fair value of the
     derivative and of the hedged item attributable to the hedged risk are
     recognized in net income/loss. If the derivative is designated as a cash
     flow hedge, the effective portions of changes in the fair value of the
     derivative are recorded in other comprehensive income (OCI) and are
     recognized in net income/loss when the hedged item affects net income/loss.
     Ineffective portions of changes in the fair value of cash flow hedges are
     recognized in net income/loss. If the derivative is designated a hedge of
     net investment in foreign operations the changes in fair value are reported
     in OCI as part of the cumulative translation adjustment to the extent that
     it is effective. The adoption of this statement did not have a material
     effect on the financial position or results of operations of the
     Corporation.

                                       6
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
        (All amounts in United States dollars, unless otherwise stated)
                        (In accordance with U.S. GAAP)

     The corporation currently utilizes forward contracts to manage foreign
     currency translation exposure of net investment in foreign operations.
     Realized and unrealized gains and losses from these hedges are not included
     in income but are shown in the cumulative translation adjustment account
     included in OCI. During the quarter ended May 31, 2001, the amount recorded
     to the cumulative translation adjustment with respect to the forward
     exchange contracts was a net gain of $604,596.


3.   Revenue Recognition

     The Corporation recognizes revenue in accordance with Statement of Position
     (SOP) 97-2, Software Revenue Recognition, issued by the American Institute
     of Certified Public Accountants.

     Substantially all of the Corporation's product license revenue is earned
     from licenses of off-the-shelf software requiring no customization. Revenue
     from these licenses is recognized when all of the following criteria are
     met: persuasive evidence of an arrangement exists, delivery has occurred,
     the fee is fixed or determinable, and collectibility is probable. If a
     license includes the right to return the product for refund or credit,
     revenue is recognized net of an allowance for estimated returns provided
     all the requirements of SOP 97-2 have been met.

     Revenue from product support contracts is recognized ratably over the life
     of the contract. Incremental costs directly attributable to the acquisition
     of product support contracts, and that would not have been incurred but for
     the acquisition of that contract, are deferred and expensed in the period
     the related revenue is recognized. These costs include commissions payable
     on sales of support contracts.

     Revenue from education, consulting, and other services is recognized at the
     time such services are rendered.

     For contracts with multiple obligations (e.g. deliverable and undeliverable
     products, support obligations, education, consulting and other services),
     the Corporation allocates revenue to each element of the contract based on
     objective evidence, specific to the Corporation, of the fair value of the
     element.

4.   Income Taxes

     The Corporation provides for income taxes in its quarterly unaudited
     financial statements based on the estimated effective tax rate for the full
     fiscal year.

                                       7
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
        (All amounts in United States dollars, unless otherwise stated)
                        (In accordance with U.S. GAAP)

5.   Net Income per Share

     The reconciliation of the numerator and denominator for the calculation of
     basic and diluted net income/(loss) per share is as follows: (000's except
     per share amounts)


<TABLE>
<CAPTION>
                                                                Three months ended
                                                                      May 31,
                                                            ---------------------------
                                                                2001            2000
                                                            ------------    -----------
<S>                                                         <C>             <C>
     Basic Net Income/(loss) per Share

        Net income/(loss)                                      (11,102)     $   11,984
                                                            ==========      ==========

        Weighted average number of shares outstanding           88,023          86,993
                                                            ==========      ==========
        Basic net income/(loss) per share                   $    (0.13)     $     0.14
                                                            ==========      ==========

     Diluted Net Income/(loss) per Share

        Net income/(loss)                                      (11,102)     $   11,984
                                                            ==========      ==========

        Weighted average number of shares outstanding           88,023          86,993
        Dilutive effect of stock options                           Nil           4,534
                                                            ----------      ----------
        Adjusted weighted average number of shares
        outstanding                                             88,023          91,527
                                                            ==========      ==========
        Diluted net income/(loss) per share                 $    (0.13)     $     0.13
                                                            ==========      ==========
</TABLE>

     For the quarter ended May 31, 2001, the effect of converting stock options
     was antidilutive as a result of net losses.

6.   Comprehensive Income

     Comprehensive Income (loss) includes net income (loss) and "other
     comprehensive income (loss)." Other comprehensive income refers to changes
     in the balances of revenues, expenses, gains and losses that are recorded
     directly as a separate component of Stockholders' Equity and excluded from
     net income.

                                       8
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
        (All amounts in United States dollars, unless otherwise stated)
                        (In accordance with U.S. GAAP)

     For the quarter ended May 31, 2001, the Corporation had other comprehensive
     expense of $870,000 compared to other comprehensive expense of $1,804,000
     for the quarter ended May 31, 2000. These amounts relate to foreign
     currency translation adjustments from those subsidiaries not using the U.S.
     dollar as their functional currency, net of unrealized net derivative gains
     (losses). Total comprehensive income (loss) was $(11,972,000) and
     $10,180,000 for the quarters ended May 31, 2001 and 2000, respectively.

7.   Segmented Information

     The Corporation has one reportable segment--computer software products.


8.   Business Restructuring Charges

     In connection with a restructuring plan to align the Corporation's cost
     structure and operations to the current economic environment, the
     Corporation recorded in the quarter ended May 31, 2001 a pre-tax business
     restructuring charge to earnings of $12,798,000. Business restructuring
     charges primarily relate to involuntary employee separations for
     approximately 300 employees, as well as asset write-downs, and accruals for
     net costs of abandoning leases and related write-down of leasehold
     improvements. The accrual is included on the balance sheet as accrued
     charges and salaries, commissions and related items.

     The employee separations impact all functional groups and geographic
     regions of the Corporation. As of May 31, 2001, substantially all employee
     separations under the restructuring plan had been completed and related
     cash payments will be substantially issued in the next two quarters of
     fiscal 2002.

     The following table displays the status of the restructuring reserve at May
     31, 2001: (000's)

<TABLE>
<CAPTION>
                                                                         Other
                                                                         -----
                                                    Employee          Restructuring
                                                                      -------------
                                                   Separations            Costs                Total
                                                   -----------            -----                -----
<S>                                                <C>                <C>                   <C>
     Restructuring charges in the quarter                9,660                  3,138             12,798
     Cash Payments                                        (758)                                     (758)
     Asset write-downs                                                         (1,557)            (1,557)
                                                  ------------           ------------       ------------
     Balance as at May 31, 2001                          8,902                  1,581             10,483
</TABLE>

                                       9
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
        (All amounts in United States dollars, unless otherwise stated)
                        (In accordance with U.S. GAAP)

9.   Litigation

     On May 5, 2000 an action was filed in the United States District Court for
     the Northern District of California against the Corporation and its
     subsidiary, Cognos Corporation (collectively "Cognos") by Business Objects
     S.A. ("Complainant"), for alleged patent infringement. The complaint
     alleges that the Corporation's Impromptu product infringes the
     Complainant's United States Patent No. 5,555,403 entitled "Relational
     Database Access System using Semantically Dynamic Objects". The complaint
     seeks relief in the form of an injunction against the Corporation and
     unspecified damages. On May 30, 2000 the Corporation answered the
     complaint, denying all material allegations, and counterclaimed against the
     Complainant for a declaratory judgement that the Corporation is not
     infringing the Complainant's patent and that the patent is invalid. As
     these actions are in the preliminary stage, the Corporation cannot estimate
     the financial impact, if any, at this time.

     In addition, the Corporation and its subsidiaries may, from time to time be
     involved in other legal proceedings, claims, and litigation that arise in
     the ordinary course of business which the Corporation believes would not
     reasonably be expected to have a material adverse effect on the financial
     condition of the Corporation.

                                      10
<PAGE>

Item 2.
                               COGNOS INCORPORATED

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        (in United States dollars, unless otherwise indicated, and in
                          accordance with U.S. GAAP)


The following information should be read in conjunction with the unaudited
Consolidated Financial Statements and Notes included in Item 1 of this Quarterly
Report and can also be read in conjunction with the audited Consolidated
Financial Statements and Notes, and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report for
the fiscal year ended February 28, 2001 (fiscal 2001).


RESULTS OF OPERATIONS
---------------------

Revenue for the quarter ended May 31, 2001 was $108.0 million, a 1% decrease
from revenue of $108.7 million for the same quarter last year. Pretax loss for
the quarter ended May 31, 2001 was $15.7 million compared to pretax income of
$16.6 million in the same quarter last year. Net loss for the current quarter
was $11.1 million compared to net income of $12.0 million for the same quarter
last year. Diluted net loss per share was $0.13 for the current quarter,
compared to diluted net income per share of $0.13 for the same quarter last
year. Basic net loss per share was $0.13 and basic net income per share was
$0.14 for the quarters ending May 31, 2001 and May 31, 2000, respectively. The
results for the quarter ended May 31, 2001 include a business restructuring
charge of $12.8 million in connection with a restructuring plan to align our
cost structure and operations to the current economic environment. Excluding the
effect of this item, net loss and diluted net loss per share for the quarter
would have been $2.1 million and $0.02, respectively, compared to net income of
$12.0 million and $0.13, respectively, for the same period last year. The
decline in operating performance is due to the uncertain economic conditions in
North America and specifically in the U.S., which is our largest market. As a
result of these economic conditions, customers have adopted conservative
behaviour and are reviewing technology purchases with more scrutiny. This has
impacted all sales but was most pronounced in deals greater than $200,000.

Total operating expenses for the quarter ended May 31, 2001 were $126.5 million,
a 34% increase from operating expenses of $94.5 million for the same quarter
last year. Operating margins for the quarter ended May 31, 2001 were -17%,
compared to 13% for the same quarter last year. Excluding the effect related to
the business restructuring charge discussed above, operating expenses in the
quarter ended May 31, 2001 would have been $113.7 million, an increase of 20%
from the same quarter last year. Operating margins for quarter would have been
-5%, compared to 13% for the same quarter last year. We implemented a
restructuring plan to align our cost structure and operations to the current
economic environment resulting in a pre-tax business restructuring charge to
earnings of $12.8 million. Business restructuring charges primarily relate to
involuntary employee separations for approximately 300 employees, as well as
asset write-downs, and accruals for net costs of abandoning leases and related
write-down of leasehold improvements. The employee separations impact all
functional groups and geographic regions.

                                      11
<PAGE>

The following table sets out, for the periods indicated, the percentage that
each income and expense item bears to revenue, and the percentage change of each
item as compared to the indicated prior period.


<TABLE>
<CAPTION>
                                                         Percentage of Revenue            Percentage Change
                                                     ----------------------------    --------------------------
                                                          Three months ended             Three months ended
                                                                May 31,                        May 31,
                                                     ----------------------------
                                                         2001            2000               2000 to 2001
                                                     ------------    ------------    --------------------------
<S>                                                  <C>             <C>             <C>
Revenue........................................         100.0%            100.0%               (0.6)%
                                                                        -------
Operating expenses
   Cost of product license.....................           1.0               1.6               (36.0)
   Cost of product support.....................           4.0               3.9                 0.5
   Selling, general, and administrative........          82.3              66.8                22.4
   Research and development....................          18.0              14.6                22.5
   Business restructuring charge                         11.8               0.0                 N.M.
                                                       ------           -------

Total operating expenses.......................         117.1              86.9                33.9
                                                       ------           -------

Operating income...............................         (17.1)             13.1                N.M.
Interest expense...............................          (0.1)             (0.1)              (45.5)
Interest income................................           2.6               2.3                 8.9
                                                       ------           -------

Income before taxes............................         (14.6)             15.3                 N.M.
Income tax provision...........................          (4.3)              4.3                 N.M.
                                                       ------           -------

Net income.....................................         (10.3)             11.0%                N.M.
                                                       ======           =======
</TABLE>


N.M.- not meaningful

Revenue

Our total revenue was $108.0 million for the quarter ended May 31, 2001, a
decrease of $0.7 million or 1%, compared to the quarter ended May 31, 2000. We
operate internationally, with a substantial portion of our business conducted in
foreign currencies. Accordingly, our results are affected by year-over-year
exchange rate fluctuations of the United States dollar relative to various
European currencies, to the Canadian dollar, and to a lesser extent, other
foreign currencies. The effect of foreign exchange rate fluctuations reduced the
overall revenue increase by approximately four percentage points for the quarter
ended May 31, 2001.

Our total revenue was derived primarily from the revenue attributable to the
licensing, supporting and servicing of our business intelligence products
solution, including PowerPlay(R), Impromptu(R), Cognos Query, Cognos Visualizer,
DecisionStream(TM), Scenario(TM), Cognos Finance, and Cognos e-Applications.
Total revenue (license, support, and services revenue) derived from these
products was $98.7 million in the quarter ended May 31, 2001, an increase of
$3.4 million or 4%, when compared to the corresponding period in the prior
fiscal year. Total revenue from these business intelligence products was 91% and
88% of total revenue for the quarters ended May 31, 2001 and May 31, 2000,
respectively.

                                      12
<PAGE>

We believe that our business intelligence products address the current market
need for distributing corporate information to the end user's desktop in an
extended enterprise environment of corporate intranets, extranets, and
client/server networks. In earlier years we addressed this opportunity with the
release of Web-based products: PowerPlay Web, Impromptu Web Reports and Cognos
Query.

Total revenue (license, support, and services revenue) from our application
development tools, PowerHouse(R) and Axiant(R), was $9.4 million for the quarter
ended May 31, 2001, a decrease of $4.1 million or 30%, compared to the
corresponding period in the prior fiscal year. We believe that, in the
long-term, revenues from these products will continue to decline.

The overall decline in total revenue from the three revenue categories in the
quarter ended May 31, 2001 from May 31, 2000 was as follows: a 24% decrease in
product license revenue, a 26% increase in product support revenue, and an 23%
increase in services revenue.


Product License Revenue
-----------------------
Product license revenue was $43.1 million in the quarter ended May 31, 2001, a
decrease of $13.6 million or 24%, compared to the corresponding period in the
prior fiscal year. The decrease in product license revenue for this period was
predominantly due to the uncertain economic conditions in North America, which
caused conservative customer behaviour including close scrutiny of technology
purchases. This affected the sales of our business intelligence products.
Product license revenue accounted for 40% of total revenue in the three months
ended May 31, 2001 compared to 52% for the corresponding period in the prior
fiscal year.

Product license revenue from the business intelligence products was $41.4
million for the quarter ended May 31, 2001, a decrease of $10.9 million or 21%,
compared to the corresponding period in the prior fiscal year. Product license
revenue from these business intelligence products accounted for 96% and 92% of
total product license revenue for the quarters ended May 31, 2001 and 2000,
respectively. The decline in product license revenue from the business
intelligence products in the quarter was in contrast to the growth rates
reported in previous quarters.

Product license revenue from the application development tools was $1.7 million
for the quarter ended May 31, 2001, a decrease of $2.8 million or 62%, compared
to the corresponding period in the prior fiscal year. The decline in product
license revenue in this market is consistent with the market trend away from
proprietary systems and host-based computing toward industry-standard systems,
corporate intranets, extranets, client/server technology and packaged
application products. In the long term, the trend of decreasing product license
revenue from these products will continue.


Product Support Revenue
-----------------------
Product support revenue was $41.8 million in the quarter ended May 31, 2001, an
increase of $8.6 million or 26%, compared to the corresponding period in the
prior fiscal year. The increase in the dollar amounts was the result of the
expansion of our customer base, as well as the renewal of support contracts. The
product support revenue associated with the expansion of our customer base
continues to exceed the rate of non-renewals of support contracts.

                                      13
<PAGE>

Product support revenue accounted for 39% and 31% of our total revenue in the
quarters ended May 31, 2001, and 2000, respectively.

Total product support revenue from the business intelligence products comprised
82% and 74% of the total product support revenue for the quarters ended May 31,
2001, and 2000, respectively. Total support revenue from the business
intelligence products increased by 40% in the quarter ended May 31, 2001, and
total support revenue from the application development tools decreased by 14%,
compared to the corresponding quarter in the prior fiscal year.


Services Revenue
----------------
Services revenue (training, consulting, and other revenue) was $23.1 million in
the quarter ended May 31, 2001, an increase of $4.4 million or 23%, compared to
the corresponding period in the prior fiscal year. Services revenue accounted
for 21% of our total revenue for the quarter ended May 31, 2001 compared to 17%
for the corresponding period in the prior fiscal year. The increase in the
dollar amounts was primarily attributable to an increase in consulting revenue
and, to a lesser extent, education revenue associated with our business
intelligence products.

In the quarter ended May 31, 2001, services revenue associated with the business
intelligence products contributed $22.8 million, an increase of $4.5 million or
24%, compared to the corresponding period in the prior fiscal year. Total
services revenue associated with our application development tools for the
quarter was $0.3 million, an immaterial decrease from the corresponding period
in the prior fiscal year. Services revenue associated with the business
intelligence products contributed 99% of the total services revenue for the
quarter ended May 31, 2001 compared to 98% for the corresponding period in the
prior fiscal year.


Cost of Product License

The cost of product license consists primarily of royalties for technology
licensed from third parties, as well as the costs of materials and distribution
related to licensed software.

The cost of product license revenue was $1.1 million, a decrease of $0.6 million
or 36% in the quarter ended May 31, 2001, compared to the corresponding period
in the prior fiscal year. These costs represented 3% of product license revenue
for the quarters ended May 31, 2001 and 2000. The decrease was primarily the
result of a decrease in royalty expense.


Cost of Product Support

The cost of product support includes the costs associated with resolving
customer inquiries and other telesupport and websupport activities, royalties in
respect of technological support received from third parties, and the cost of
materials delivered in connection with enhancement releases.

The cost of product support revenue was $4.3 million, an immaterial increase of
0.5% in the quarter ended May 31, 2001, compared to the corresponding period in
the prior fiscal year.

The cost of product support represented 10% of total product support revenue for
the quarter ended May 31, 2001 as compared to 13% for the corresponding quarter
in prior fiscal year.

                                      14
<PAGE>

Selling, General, and Administrative

Selling, general, and administrative (SG&A) expenses were $88.9 million, an
increase of $16.2 million or 22% in the quarter ended May 31, 2001, compared to
the corresponding period in the prior fiscal year. These costs increased as a
percentage of revenue, representing 82% for the quarter ended May 31, 2001
compared to 67% for the quarter ended May 31, 2000.

The increase in these expenses was predominantly because of increased staffing
and related compensation expenses. The increase in the average number of
employees within SG&A was 20% for the three months ended May 31, 2001, when
compared to the corresponding period in the prior fiscal year.


Research and Development

Research and development (R&D) costs were $19.4 million, an increase of $3.6
million or 23% in the quarter ended May 31, 2001, compared to the corresponding
period in the prior fiscal year. The increase was predominantly the result of
increases associated with higher staffing levels and related compensation
expenses. The increase in the average number of employees within R&D was 21% for
the quarter ended May 31, 2001 compared to the corresponding period in the prior
fiscal year.

During the quarter ended May 31, 2001, we continued to invest in R&D activities
for our business intelligence solutions, including further development of
e-Application packages and continued investment in the existing Cognos
enterprise business intelligence platform. During the quarter we released a new
version of Impromptu Web Reports for the Sun Solaris operating system.

Software development costs are expensed as incurred unless they meet generally
accepted accounting criteria for deferral and amortization. ___ Software
development costs incurred prior to the establishment of technological
feasibility do not meet these criteria, and are expensed as incurred.
Capitalized costs are amortized over a period not exceeding 36 months. No costs
were deferred in either quarter. Costs were not deferred in the period because
either no projects met the criteria for deferral or, if met, the period between
achieving technological feasibility and the general availability of the product
was short, rendering the associated costs immaterial.


Business Restructuring Charge

During the quarter ended May 31, 2001, we implemented a restructuring plan to
align our cost structure and operations to the current economic environment,
resulting in a pre-tax business restructuring charge to earnings of $12.8
million. Business restructuring charges primarily relate to involuntary employee
separations for approximately 300 employees, as well as asset write-downs, and
accruals for net costs of abandoning leases and related write-down of leasehold
improvements. The employee separations impact all functional groups and
geographic regions.

                                      15
<PAGE>

Cost savings as a result of the restructuring plan will reduce compensation,
amortization, and lease expenses. The decrease in costs outlined above will
primarily impact selling, general and administration expense and research and
development expense. The expense reductions are expected to begin in the second
quarter of fiscal 2002.

Cash outlays of $0.8 million related to the restructuring activities were paid
in the first quarter of fiscal 2002 and the balance will be substantially paid
in the next two quarters.


Interest Income and Expense

Net interest income was $2.7 million, an increase of $0.3 million or 12% in the
quarter ended May 31, 2001, compared to the corresponding period in the prior
fiscal year. The increase was primarily attributable to a larger average
portfolio partially offset by a decrease in the average effective interest
rates, and to a lesser extent, the impact of exchange rate fluctuations.


Income Tax Provision

Our tax rate is affected by the relative profitability of our operations in
various geographic regions. In the current quarter ended May 31, 2001, we
recorded an income tax benefit of $4.6 million which represents an effective
income tax rate of 29.5%. The tax recovery was booked at 29.5% on $15.7 million
of pre-tax loss for the quarter as management believes the tax benefit of the
loss will be utilized in the upcoming quarters of the current fiscal year. In
the quarter ended May 31, 2000, we recorded an income tax provision of $4.7
million, representing an effective income tax rate of 28%.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

As of May 31, 2001 we had $239.4 million in cash, cash equivalents, and
short-term investments, an increase of $4.9 million from February 28, 2001. In
addition, we have arranged an unsecured credit facility that includes an
operating line and foreign exchange conversion facilities. The operating line
permits us to borrow funds or issue letters of credit or guarantee up to
Cdn$15.0 (US$9.7) million, subject to certain covenants. As of May 31, 2001,
there were no direct borrowings under this operating line. As discussed further
below, we have foreign exchange conversion facilities that allow us to hold
foreign exchange contracts of approximately Cdn$130.0 (US$84.1) million
outstanding at any one time.

As of May 31, 2001, we had a total of $1.6 million of long-term indebtedness
(including the current portion), consisting of other long-term liabilities and
certain capital leases. As of May 31, 2001, working capital was $191.7 million,
a decrease of $5.9 million from February 28, 2001. The decrease was primarily
due to decreases in accounts receivable and increases in current liabilities for
accrued charges and salaries, commissions and related items. These items were
partially offset by an increase in cash and short-term investments and decreases
in deferred product support revenue and income taxes payable.

Cash provided by operating activities (after changes in non-cash working capital
items) for the three months ended May 31, 2001 was $8.7 million; a $15.2 million
decrease when compared to

                                      16
<PAGE>

the corresponding period in the prior fiscal year. This decrease as compared to
the prior period was primarily due to the loss incurred in the quarter, a
decrease in accounts payable and an increase in deferred income tax assets. This
was partially offset by a decrease in accounts receivable.

Cash provided by investing activities was $50.9 million for the three months
ended May 31, 2001 compared to $17.8 million in the corresponding period in the
prior fiscal year. During the current three-month period, we received $57.7
million related to the maturity of short-term investments (net of investments in
short-term investments) compared to $31.7 million in the corresponding period in
the prior fiscal year. During the quarter ended May 31, 2001 additions to fixed
assets were $6.8 million as compared to $13.9 million for the corresponding
quarter in fiscal 2001. Additions to fixed assets during the quarter ended May
31, 2000 included $6.1 million relating to the construction of a second building
on the site of our headquarters in Ottawa. The construction was substantially
completed in fourth quarter of fiscal 2001, therefore, for the quarter ended May
31, 2001 no construction costs were incurred.

Cash provided by financing activities was $3.7 million for the three months
ended May 31, 2001 compared to $9.3 million in the corresponding period in the
prior fiscal year. We issued 320,000 common shares, valued at $3.6 million,
during the three months ended May 31, 2001, and did not repurchase any of our
own shares. In comparison we issued 778,000 shares valued at $9.0 million, and
did not repurchase any of our own shares during the three month period ended May
31, 2000. The issuance of shares in both periods was pursuant to our stock
purchase plan and the exercise of stock options by employees, officers, and
directors.

In October 2000, we adopted a new program that enables us to purchase up to
4,403,510 common shares (not more than 5% of those issued and outstanding)
between October 9, 2000 and October 8, 2001. Purchases will be made on the
Nasdaq Stock Market at prevailing open market prices and paid out of general
corporate funds. This program does not commit us to make any share repurchases.
All repurchased shares will be cancelled. We did not repurchase shares under
this program during the three months ended May 31, 2001.

Our policy with respect to foreign currency exposure is to manage our financial
exposure to certain foreign exchange fluctuations with the objective of
neutralizing some of the impact of foreign currency exchange movements. To
achieve this objective, we enter into foreign exchange forward contracts to
hedge portions of the net investment in our various subsidiaries. We enter into
these foreign exchange forward contracts with major Canadian chartered banks,
and therefore do not anticipate non-performance by these counterparties. We
limit these foreign exchange forward contracts to a maximum term of six months.
The amount of the exposure on account of any non-performance is restricted to
the unrealized gains in such contracts. As of May 31, 2001, we had foreign
exchange forward contracts, with maturity dates ranging from June 28, 2001 to
November 29, 2001, to exchange various foreign currencies in the amount of $16.9
million.

Over the next twelve months our operations will be financed by current cash
balances and funds from operations. If we were to require funds in excess of our
current cash position, we would expect to obtain such funds from, one or a
combination of, the expansion of our existing credit facilities, or from public
or private sales of equity or debt securities.

                                      17
<PAGE>

EUROPEAN ECONOMIC AND MONETARY UNION
------------------------------------

The euro currency was introduced on January 1, 2000, and the transition to this
new currency has associated with it many potential implications for businesses
operating in Europe including, but not limited to, products, information
technology, pricing, currency exchange rate risk and derivatives exposure,
continuity of material contracts, and potential tax consequences.

The new euro currency is to be introduced in stages over the course of a 3 1/2
year transition period. We believe the transition to the euro will have limited
longer-term implications on our business. We have taken steps in the transition
to the euro in the area of our internal processes and systems through
identifying, modifying, and testing these processes and systems to handle
transactions and reporting requirements involving the euro in accordance with
the regulations. Our financial application systems represent the most
significant internal systems that are affected by the transition to the euro. We
earlier upgraded these systems to a version that enables us, together with
certain process changes and modifications provided by the application vendor to
their supported customers, to handle the initial requirements for transactions
involving the euro. In the current quarter we have reassessed the need to
further upgrade our financial applications system to handle the full
requirements of the euro. We believe our current procedures and the
modifications which have been made to the financial application system are
adequate to handle the adoption of the euro, however, we continue to identify
and, where necessary, modify our systems and processes in order to handle the
various stages of the euro implementation. We are continuing to monitor our
pricing in Europe, giving consideration to the transition to the euro.

We believe that the costs relating to the conversion of our internal systems and
processes incurred to date, along with any future costs relating to such
conversions, will not have a material adverse effect on our business, results of
operations, or financial condition.


CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
----------------------------------------------

This Form 10-Q contains forward-looking statements relating to, among other
things our expectations concerning future revenues and earnings; the effect of
reduced expenses on results; the effect of the workforce reduction on strategic
programs; the effect of the current economic environment on our business and
technology strategies; our ability to deliver business intelligence solutions
that respond to changing market requirements; the future prospects of our
current and future products, and our ability to compete in an intensely
competitive marketplace.

These forward-looking statements are neither promises nor guarantees, but
involve risks and uncertainties that may cause future results to differ
materially from those in the forward-looking statements. Factors that may cause
such differences include, but are not limited to: the impact of global economic
conditions on our business and our ability to implement timely and appropriate
remedial measures; our ability to select and implement appropriate business
models and strategies; our ability to maintain revenue growth or to anticipate a
decline in revenue from any of our products or services; fluctuations in our
quarterly and annual operating results based on historical patterns, which may
cause our stock price to fluctuate or decline; rapid technological change and
new product introductions and enhancements in the business intelligence software
market; our reliance on partners and other third party distribution channels to
market and distribute our products; unauthorized use of our intellectual
property; claims by third parties that

                                      18
<PAGE>

our software infringes their intellectual property; our ability to compete in an
intensely competitive marketplace; the risks inherent in international
operations, such as currency exchange rate fluctuations; our ability to
identify, hire, train, motivate and retain highly qualified management and other
key personnel; our ability to identify, pursue and complete acquisitions which
could divert management attention and financial resources and not produce
desired business results; as well as the risk factors discussed in our most
recent Annual Report on Form 10-K filed with the United States Securities and
Exchange Commission. Readers should not place undue reliance on any such
forward-looking statements, which speak only as of the date they are made. We
disclaim any obligation to publicly update or revise any such statement to
reflect any change in our expectations or in events, conditions, or
circumstances on which any such statements may be based, or that may affect the
likelihood that actual results will differ from those set forth in the forward-
looking statements. As a result of these, and other factors, we may experience
material fluctuations in future operating results on a quarterly and annual
basis, which could materially and adversely affect our business, financial
condition, operating results and stock price. We typically realize a larger
percentage of our annual revenue and earnings in the fourth quarter of each
fiscal year, and lower revenue and earnings in the first quarter of the next
fiscal year. A detailed discussion of each of these risk factors is contained
under the heading "Certain Factors That May Affect Future Results" in our most
recent Annual Report on Form 10-K filed with the United States Securities and
Exchange Commission.

                                      19
<PAGE>

Item 3.   Quantitative and Qualitative Disclosure about Market Risk
          ---------------------------------------------------------

Market risk represents the risk of loss that may impact our financial position
due to adverse changes in financial market prices and rates. Our market risk
exposure is primarily a result of fluctuations in interest rates and foreign
currency exchange rates. We do not hold or issue financial instruments for
trading purposes.


Interest Rate Risk

Our exposure to market rate risk for changes in interest rates relates primarily
to our investment portfolio. The investment of cash is regulated by our
investment policy of which the primary objective is security of principal. Among
other selection criteria, the investment policy states that the term to maturity
of investments cannot exceed one year in length. We do not use derivative
financial instruments in our investment portfolio.

Interest income on our cash, cash equivalents, and short-term investments is
subject to interest rate fluctuations, but we believe that the impact of these
fluctuations does not have a material effect on our financial position due to
the short-term nature of these financial instruments. The amount of our
long-term debt is immaterial. Our interest income and interest expense are most
sensitive to the general level of interest rates in Canada and the United
States. Sensitivity analysis is used to measure our interest rate risk. For the
quarter ended May 31, 2001, a 100 basis-point adverse change in interest rates
would not have had a material effect on our consolidated financial position,
earnings, or cash flows.


Foreign Currency Risk

We operate internationally; accordingly, a substantial portion of our financial
instruments are held in currencies other than the United States dollar. Our
policy with respect to foreign currency exposure is to manage financial exposure
to certain foreign exchange fluctuations with the objective of neutralizing some
of the impact of foreign currency exchange movements. To achieve this objective,
we enter into foreign exchange forward contracts to hedge portions of the net
investment in various subsidiaries. The forward contracts are typically between
the United States dollar and the British pound, the German mark, and the
Australian dollar. Sensitivity analysis is used to measure our foreign currency
exchange rate risk. As of May 31, 2001, a 10% adverse change in foreign exchange
rates versus the U.S. dollar would not have had a material effect on our
reported cash, cash equivalents, and short-term investments.

                                      20
<PAGE>

PART II - OTHER INFORMATION
---------------------------

Item 1.   Legal Proceedings
          -----------------

On May 5, 2000 an action was filed in the United States District Court for the
Northern District of California against us and our subsidiary, Cognos
Corporation (collectively "Cognos") by Business Objects S.A. ("Complainant"),
for alleged patent infringement. The complaint alleges that our Impromptu
product infringes the Complainant's United States Patent No. 5,555,403 entitled
"Relational Database Access System using Semantically Dynamic Objects". The
complaint seeks relief in the form of an injunction against us and unspecified
damages. On May 30, 2000 we answered the complaint, denying all material
allegations, and counterclaimed against Business Objects for a declaratory
judgement that we are not infringing Business Objects' patent and that the
patent is invalid. Based on the preliminary stage of the proceedings, we cannot
estimate the financial impact, if any, at this time. If successful, a claim of
infringement against us and our inability to license the infringed or similar
technology on commercially reasonable terms could have a material adverse effect
on our business, operating results, and financial condition.

In addition, the Corporation and its subsidiaries may, from time to time be
involved in other legal proceedings, claims, and litigation that arise in the
ordinary course of business which the Corporation believes would not reasonably
be expected to have a material adverse effect on the financial condition of the
Corporation.


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

a)   Exhibits

         99   - Selected Consolidated Financial Statements in U.S. Dollars and
                   in accordance with Canadian Generally Accepted Accounting
                   Principles

         99.1   Management's Discussion and Analysis of Financial Condition and
                   Results of Operations-Canadian Supplement


b)   Reports on Form 8-K

There were no reports on Form 8-K filed during the three months ended May 31,
2001.

                                      21
<PAGE>

                                   SIGNATURE


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.


                                  COGNOS INCORPORATED
                                     (Registrant)



      July 12, 2001                         /s/ Robert G. Ashe
---------------------------       ---------------------------------------
           Date                   Robert G. Ashe
                                  Senior Vice President, Chief Corporate Officer
                                     (Principal Financial Officer
                                     and Chief Accounting Officer)

                                      22
<PAGE>

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT NO.                                  DESCRIPTION                                      PAGE
-----------                                  -----------                                      ----
<S>                                                                                           <C>
    99            Selected Consolidated Financial Statements and Notes in U.S. Dollars
                  and in accordance with Canadian Generally Accepted Accounting
                  Principles                                                                  24-30
    99.1          Management's Discussion and Analysis of Financial Condition and
                  Results of Operations-Canadian Supplement                                   31-32
</TABLE>

                                      23