<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 JUNE 30, 1998

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                       THE SECURITIES EXCHANGE ACT OF 1934
                          COMMISSION FILE NUMBER 0-21761

                        GEOTEL COMMUNICATIONS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                DELAWARE                                 04-3194255
     (State or Other Jurisdiction of            (IRS Employer Identification
     Incorporation or Organization)                        Number)

                   900 CHELMSFORD STREET, TOWER II, 12TH FLOOR
                           LOWELL, MASSACHUSETTS 01851
               (Address of principal executive offices) (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (978) 275-5100

                           NO CHANGE SINCE LAST REPORT
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:

                CLASS                      OUTSTANDING AT AUGUST 7, 1998
    -----------------------------          ------------------------------
    Common Stock, $0.01 par value                13,344,489 Shares
    =============================          ==============================


                                        1


<PAGE>   2






                        GEOTEL COMMUNICATIONS CORPORATION

                               INDEX TO FORM 10-Q

                                                                    PAGE NO.
                                                                    --------

PART I     FINANCIAL INFORMATION

Item 1     Financial Statements:

           Consolidated Balance Sheets as of June 30, 1998                3
           and December 31, 1997

           Consolidated Statements of Income for the                      4
           three and six months ended June 30, 1998 and 1997

           Consolidated Statements of Cash Flows for the                  5
           three and six months ended June 30, 1998 and 1997

           Notes to Consolidated Financial Statements                     6

Item 2     Management's Discussion and Analysis of                   7 - 12
           Financial Condition and Results of  Operations

PART II    OTHER INFORMATION

Item 2     Changes in Securities and Use of Proceeds                     13

Item 4     Submission of Matters to a Vote of Security Holders           13

Item 5     Other Information                                             13 
 
Item 6     Exhibits and Reports on Form 8-K                              13

           Signature                                                     14
           Exhibit 10.1 Amended and Restated 1996 Employee
           Stock Purchase Plan                                      15 - 23
           Exhibit 10.2 1998 Non-Executive Employee Stock 
           Option Plan                                              24 - 30
           Exhibit 27.1 Financial Data Schedule                          31



                                        2


<PAGE>   3




PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        GEOTEL COMMUNICATIONS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                                     JUNE 30,       DECEMBER 31,
                                                       1998             1997
                                                     --------       ------------

ASSETS
------

Current assets:
Cash and cash equivalents                             $45,444         $40,428
Accounts receivable, net                                5,568           3,685
Prepaid expenses and other current assets               1,683           1,648
Deferred income taxes                                     763             763
                                                      -------         -------
Total current assets                                   53,458          46,524
                                                      -------         -------

Property and equipment, net                             3,620           2,322
Deferred income taxes                                   1,427           1,427
                                                      -------         -------
Total assets                                          $58,505         $50,273
                                                      =======         =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable                                      $   634         $   708
Accrued expenses                                        1,592             967
Accrued compensation and related accruals               1,900           1,311
Accrued income taxes                                      432             951
Deferred revenue                                        9,267           6,410
                                                      -------         -------
Total current liabilities                              13,825          10,347
                                                      -------         -------

Stockholders' equity:
Preferred stock                                            --              --
Common stock                                              136             135
Additional paid-in capital                             42,422          40,893
Accumulated earnings (deficit)                          2,905            (202)
Unearned compensation                                    (737)           (855)
                                                      -------         -------
                                                       44,726          39,971
Less treasury stock, at cost                              (46)            (45)
                                                      -------         -------
Total stockholders' equity                             44,680          39,926
                                                      -------         -------
Total liabilities and stockholders' equity            $58,505         $50,273
                                                      =======         =======


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

                                        3


<PAGE>   4




                        GEOTEL COMMUNICATIONS CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED           SIX MONTHS ENDED
                                                          JUNE 30,                    JUNE 30,
                                                   ---------------------       ---------------------
                                                     1998          1997          1998          1997
                                                   -------       -------       -------       -------

<S>                                                <C>           <C>           <C>           <C>    
Revenues:
   Software license                                $ 7,618       $ 3,072       $13,767       $ 5,546
   Services and other                                2,441           936         4,070         1,649
                                                   -------       -------       -------       -------
   Total revenues                                   10,059         4,008        17,837         7,195
                                                   -------       -------       -------       -------
Cost of Revenues:
   Cost of software licenses                           410            78           595           177
   Cost of services and other                        1,682           625         3,121         1,129
                                                   -------       -------       -------       -------
   Total cost of revenues                            2,092           703         3,716         1,306
                                                   -------       -------       -------       -------
Gross profit                                         7,967         3,305        14,121         5,889
                                                   -------       -------       -------       -------

Operating Expenses:
   Research and development                          1,653           937         2,999         1,804
   Sales and marketing                               3,162         1,303         5,558         2,330
   General and administrative                          917           467         1,698           835
                                                   -------       -------       -------       -------
   Total operating expenses                          5,732         2,707        10,255         4,969
                                                   -------       -------       -------       -------

Income from operations                               2,235           598         3,866           920
Interest income                                        571           483         1,105           907
                                                   -------       -------       -------       -------
Income before income taxes                           2,806         1,081         4,971         1,827

Provision for income taxes                           1,052           100         1,864           121
                                                   -------       -------       -------       -------
Net income                                         $ 1,754       $   981       $ 3,107       $ 1,706
                                                   =======       =======       =======       =======

Net income per share:
   Basic earnings per share                        $  0.13       $  0.08       $  0.24       $  0.13
                                                   =======       =======       =======       =======
   Diluted earnings per share                      $  0.12       $  0.07       $  0.22       $  0.12
                                                   =======       =======       =======       =======

Weighted average number of common and common
   equivalent shares outstanding:
   Basic shares                                     13,017        12,700        12,973        12,665
                                                   =======       =======       =======       =======
   Diluted shares                                   14,142        13,767        13,999        13,768
                                                   =======       =======       =======       =======
</TABLE>






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


                                        4


<PAGE>   5


                        GEOTEL COMMUNICATIONS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                      SIX MONTHS ENDED
                                                                          JUNE 30,
                                                                   ----------------------
                                                                     1998           1997
                                                                   -------        -------

<S>                                                                <C>            <C>    
Cash flows from operating activities:
Net income                                                         $ 3,107        $ 1,706
Adjustments to reconcile net income
  to net cash provided by operating activities:
     Depreciation and amortization                                     496            348
     Equity compensation                                               118            220
     Tax benefit from employees' exercise of stock options             750              -
Changes in operating assets and liabilities:
     Accounts receivable                                            (1,883)          (307)
     Prepaid expenses and other current assets                         (35)          (432)
     Accounts payable                                                  (74)           (81)
     Accrued expenses and other current liabilities                  1,214            286
     Accrued income taxes                                             (519)             -
     Deferred revenue                                                2,857          2,920
                                                                   -------        -------
         Net cash provided by operating activities                   6,031          4,660
                                                                   -------        -------

Cash flows used in investing activities:
     Purchases of property and equipment                            (1,794)        (1,245)
                                                                   -------        -------

Cash flows from financing activities:
     Proceeds from sale of common stock and option exercises           780            154
     Offering costs of registering common stock                          -            (63)
     Proceeds from notes receivable for common stock                     -            103
     Acquisition of treasury stock                                      (1)            (2)
                                                                   -------        -------
         Net cash provided by financing activities                     779            192
                                                                   -------        -------

Net increase in cash and cash equivalents                            5,016          3,607
Cash and cash equivalents, beginning of period                      40,428         33,263
                                                                   -------        -------
Cash and cash equivalents, end of period                           $45,444        $36,870
                                                                   =======        =======
</TABLE>


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


                                        5


<PAGE>   6



                        GEOTEL COMMUNICATIONS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated financial statements for the three and six month periods
ended June 30, 1998 and the related footnote information are unaudited and have
been prepared on a basis substantially consistent with the 1997 audited
consolidated financial statements, and in the opinion of management include all
adjustments (consisting of only normal recurring adjustments) necessary for fair
presentation of the results of this interim period. These statements should be
read in conjunction with the consolidated financial statements and related notes
for the year ended December 31, 1997 included in the Company's Amended Form
10-K. The results of operations for the three and six month periods ended June
30, 1998 are not necessarily indicative of the results to be expected for the
entire year.

     GeoTel Communications Corporation ("GeoTel" or the "Company") is a provider
of customer-interaction software solutions for call center applications focused
on enhanced voice and data routing technology that enables customer-oriented
companies to deliver responsive and cost-effective customer service. The
Company's software solutions are aimed at decentralized or service-oriented
corporations that use call centers, voice response units, the Internet and other
answering resources to interact with their customers. Principal operations of
the Company commenced during 1995. The Company currently derives substantially
all of its revenues from licenses of the Intelligent CallRouter ("ICR") and
Network ICR products and related services. The Company primarily markets its
products in the United States through a direct sales force which is complemented
by strategic sales channels, selected resellers and international partners.

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. COMPUTATION OF INCOME PER SHARE

     Net income per basic common share is computed by dividing income by the
weighted average number of common shares outstanding for the period which
includes vested restricted common stock. Net income per diluted common share is
computed based on the weighted average number of common and dilutive common
equivalent shares outstanding during each period. Common equivalent shares
consist of the Company's common stock options and unvested restricted common
stock outstanding in the period. The calculation of per share earnings is as
follows:

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                                        JUNE 30,                            JUNE 30,
                                                             -----------------------------       -----------------------------
                                                                 1998              1997              1998             1997
                                                             -----------       -----------       -----------       -----------
                                                                           (IN THOUSANDS EXCEPT PER SHARE DATA)

<S>                                                          <C>               <C>               <C>               <C>        
Basic:
------
Net income                                                   $     1,754       $       981       $     3,107       $     1,706
                                                             ===========       ===========       ===========       ===========
Weighted average common shares outstanding                    13,016,761        12,699,949        12,972,774        12,665,481
                                                             ===========       ===========       ===========       ===========
Net income per share                                         $      0.13       $      0.08       $      0.24       $      0.13
                                                             ===========       ===========       ===========       ===========

Diluted:
--------
Net income                                                   $     1,754       $       981       $     3,107       $     1,706
                                                             ===========       ===========       ===========       ===========
Weighted average common shares outstanding                    13,016,761        12,699,949        12,972,774        12,665,481
Common stock equivalents                                       1,124,774         1,066,839         1,025,828         1,102,472
                                                             -----------       -----------       -----------       -----------
Total weighted average shares and equivalents outstanding     14,141,535        13,766,788        13,998,602        13,767,953
                                                             ===========       ===========       ===========       ===========
Net income per share                                         $      0.12       $      0.07       $      0.22       $      0.12
                                                             ===========       ===========       ===========       ===========
</TABLE>



                                        6


<PAGE>   7






ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying consolidated
financial statements for the periods specified and the associated notes. Further
reference should be made to the Company's Amended Form 10-K for the year ended
December 31, 1997.

OPERATING RESULTS

     The following table presents selected unaudited financial information as
the percentage of the Company's total revenues represented by each item, for the
Company's quarters and six-month periods ended June 30, 1998 and 1997. The
Company's operating results for any one quarter are not necessarily indicative
of results for any future period.

<TABLE>
<CAPTION>
                                                      QUARTER ENDED JUNE 30,            SIX MONTHS ENDED JUNE 30,
                                                      ----------------------            -------------------------
                                                       1998             1997             1998                1997
                                                      -----            -----            -----               -----
<S>                                                   <C>              <C>              <C>                 <C>  
Revenues:
     Software license ..........................       75.7%            76.6%            77.2%               77.1%
     Services and other ........................       24.3             23.4             22.8                22.9
                                                      -----            -----            -----               -----
     Total revenues ............................      100.0            100.0            100.0               100.0
                                                      -----            -----            -----               -----

Cost of Revenues:
     Cost of software licenses .................        4.1              1.9              3.3                 2.5
     Cost of services and other ................       16.7             15.6             17.5                15.7
                                                      -----            -----            -----               -----
     Total cost of revenues ....................       20.8             17.5             20.8                18.2
                                                      -----            -----            -----               -----

Gross Profit ...................................       79.2             82.5             79.2                81.8
                                                      -----            -----            -----               -----

Operating Expenses:

     Research and development ..................       16.5             23.4             16.8                25.0
     Sales and marketing .......................       31.4             32.5             31.2                32.4
     General and administrative ................        9.1             11.7              9.5                11.6
                                                      -----            -----            -----               -----
     Total operating costs .....................       57.0             67.6             57.5                69.0
                                                      -----            -----            -----               -----

Income from operations .........................       22.2%            14.9%            21.7%               12.8%
                                                      =====            =====            =====               =====
</TABLE>



                                        7


<PAGE>   8



REVENUES

     Total revenues for the second quarter of 1998 increased by 151.0% to
$10,059,000 from $4,008,000 for the second quarter of 1997. Software license
revenue during the second quarter of 1998 increased by 148.0% to $7,618,000 from
$3,072,000 for the second quarter of 1997. Total revenues for the six months
ended June 30, 1998 increased by 147.9% to $17,837,000 from $7,195,000 for the
six months ended June 30, 1997. Software license revenue during these six-month
periods increased 148.2% to $13,767,000 from $5,546,000. The Company believes
that the increase in software license revenue is attributable to several factors
including revenue recognized under an international software licensing agreement
with Digital Equipment Co., Ltd. (the "DEC Agreement"); continued market
acceptance of the Company's products indicated by an increase in unit sales; an
increase in the size of the Company's direct sales force; expansion of the sales
channels through the addition of selected resellers and international partners,
and an increase in the Company's customer base. The DEC Agreement provides,
among other things, for the resale of a specified number of software licenses
and one year maintenance support valued at approximately $7,800,000. In the
second quarter of 1998, under the DEC Agreement, the Company recognized
approximately $1,266,000 in software license revenue and $162,500 in services
and other revenue compared to no software license revenue and $75,000 in
services and other revenue for the second quarter of 1997. The Company has
recognized $5,640,000 in software revenue and $851,000 in services and other
revenue under the DEC Agreement on a cumulative basis through June 30, 1998.
Management anticipates recognizing the remaining revenue under the DEC Agreement
in the next quarter.

     Services and other revenue for the second quarter of 1998 increased by
160.8% to $2,441,000 from $936,000 for the second quarter of 1997. In the second
quarter of 1998, maintenance revenue, installation services revenue, and
professional services and other revenue represented 41.6%, 24.6% and 33.8%,
respectively, of services and other revenue. In the second quarter of 1997,
maintenance revenue, installation services revenue and professional services and
other revenue represented 69.8%, 29.3%, and .9%, respectively, of services and
other revenue. Services and other revenue for the six months ended June 30, 1998
increased by 146.8% to $4,070,000 from $1,649,000 for the six months ended June
30, 1997. Maintenance revenue, installation services revenue and professional
services and other revenue represented 45.7%, 30.7% and 23.6%, respectively, of
services and other revenue for the six months ended June 30, 1998. Services and
other revenue decreased slightly to 22.8% of total revenues in the six months
ended June 30, 1998 from 22.9% of total revenues in the six months ended June
30, 1997. Services and other revenue increased in dollars in the three and
six-month periods ended June 30, 1998, as a result of the increase in the
Company's customer base. The Company anticipates that maintenance revenue will
increase as a percentage of total revenues as the Company's customer base
increases. Installation services revenue will vary based upon software license
revenue. Professional services and other revenue are non-recurring in nature and
will fluctuate in dollars and as a percentage of total revenues from quarter to
quarter. The Company performs professional services primarily in situations
where such work will result in additional software license revenue.

     International revenues for the second quarter of 1998 increased 162.1% to
$2,687,000 from $1,025,000 for the second quarter of 1997 and increased as a
percentage of total revenues to 26.7% from 25.6%. International revenues for the
six months ended June 30, 1998 increased 213.4% to $4,936,000 from $1,575,000
for the six months ended June 30, 1997. International revenues in 1998 and 1997
was derived from three and two customers, respectively. The Company believes
that it will continue to derive a significant portion of its total revenues from
international sales and that international revenues will comprise a larger
percentage of total revenues in future years. To date, the Company's
international revenues have been denominated in U.S. currency.

     A significant portion of the Company's total revenues to date has been
derived from a limited number of customers. Revenues attributable to the five
largest customers accounted for approximately 73.7% and 77.9% of the Company's
total revenues for the quarters ended June 30, 1998 and 1997, respectively.
Revenues attributable to the five largest customers for the six months ended
June 30, 1998 and 1997 were 59.6% and 63.6%, respectively. For the quarters
ended June 30, 1998 and 1997, three and two customers represented more than ten
percent of the Company's total revenue, respectively. For the six months ended
June 30, 1998 and 1997, four and two customers represented more than ten percent
of the Company's total revenue, respectively. The Company expects that it will
continue to be dependent upon a limited number of customers for a significant
portion of its revenues in future periods.


                                        8


<PAGE>   9




COST OF REVENUES

     Cost of software licenses. Cost of software licenses consists principally
of development costs associated with the DEC Agreement and the costs of
interface cards. Cost of software licenses for the second quarter of 1998
increased by 425.6% to $410,000 from $78,000 for the second quarter of 1997.
Cost of software licenses as a percentage of software license revenue were 5.4%
and 2.5% for the second quarters of 1998 and 1997, respectively. Cost of
software licenses for the six months ended June 30, 1998 increased by 236.2% to
$595,000 from $177,000 for the six months ended June 30, 1997. Cost of software
licenses as a percentage of software license revenue were 4.3% and 3.2% for the
six-month periods ended June 30, 1998 and 1997, respectively. The increases in
dollars and as a percentage of software license revenues in 1998 were due to an
increase in development costs associated with development revenues. The Company
believes that in future periods, the percentage of cost of software licenses
will range from 3% to 5% of software license revenue but may increase depending
upon the size of any development related contracts.

     Cost of services and other. Cost of services and other revenue consists
principally of the costs incurred to provide installation, professional
services, maintenance and training services. The expenses incurred to provide
these services are comprised primarily of personnel (salaries, fringe benefits
and recruiting fees), travel and facility costs. Cost of services and other
revenue for the second quarter of 1998 increased by 169.1% to $1,682,000 from
$625,000 for the second quarter of 1997. Cost of services and other revenue as a
percentage of services and other revenue were 68.9% and 66.8% for the second
quarters of 1998 and 1997, respectively. Cost of services and other revenue for
the six months ended June 30, 1998 increased by 176.4% to $3,121,000 from
$1,129,000 for the six months ended June 30, 1997. Cost of services and other
revenue as a percentage of services and other revenue were 76.7% and 68.5% for
the six months ended June 30, 1998 and 1997, respectively. The increases in
dollars and as a percentage of services and other revenue for the quarter and
six-month period ended June 30, 1998 as compared to the corresponding periods
ended June 30, 1997 were primarily due to an increase in personnel and travel
costs. These costs increased as a result of the increase in the number of
customers under maintenance contracts. The Company believes that in future
periods, cost of services and other revenue as a percentage of services and
other revenue will fluctuate significantly based upon the mix of the services
provided. The Company plans to continue to invest in its infrastructure both
domestically and internationally and as a result, the Company anticipates that
the cost of services and other revenue will increase in dollars and as a
percentage of services and other revenue. The Company believes that in future
periods, cost of services and other revenue will range from 75% to 85% of
services and other revenue.

OPERATING EXPENSES

     Research and Development. Research and development expenses consist
principally of personnel and facility costs. Research and development expenses
for the second quarter of 1998 increased by 76.4% to $1,653,000 from $937,000
for the second quarter of 1997. Research and development expenses as a
percentage of total revenue were 16.5% and 23.4% for the second quarters of 1998
and 1997, respectively. Research and development expenses for the six months
ended June 30, 1998 increased by 66.2% to $2,999,000 from $1,804,000 for the six
months ended June 30, 1997. Research and development expenses as a percentage of
total revenue were 16.8% and 25.0% for the six-month periods ended June 30, 1998
and 1997, respectively. The decrease as a percentage of total revenue for the
quarter and six-month period ended June 30, 1998 as compared to the
corresponding periods ended June 30, 1997 was primarily the result of the
Company's significant revenue growth. The increase in absolute dollars for the
quarter and six-month period ended June 30, 1998 as compared to the
corresponding periods ended June 30, 1997 was the result of increases in
personnel and related facility costs. The major product development efforts in
the second quarter of 1998 related to the development of interfaces for
international carriers, computer telephony integration for the desktop and
enhancements to the Company's existing products. The Company plans to continue
to introduce enhancements to its existing products and new products that can be
sold to existing and new customers. The Company is also working on several
projects that will be designed to enhance its products for use with the Internet
and Intranets. The Company anticipates that research and development expenses
will continue to increase in absolute dollars and range from 17% to 20% of total
revenue in the foreseeable future.


                                        9


<PAGE>   10




     Sales and Marketing. Sales and marketing expenses consist principally of
personnel (salaries, commissions and fringe benefits), travel, trade shows,
promotional expenses and facility costs. Sales and marketing expenses for the
second quarter of 1998 increased by 142.7% to $3,162,000 from $1,303,000 for the
second quarter of 1997. Sales and marketing expenses as a percentage of total
revenues were 31.4% and 32.5% for the second quarters of 1998 and 1997,
respectively. Sales and marketing expenses for the six months ended June 30,
1998 increased by 138.5% to $5,558,000 from $2,330,000 for the six months ended
June 30, 1997. Sales and marketing expenses as a percentage of total revenues
were 31.2% and 32.4% for the six months ended June 30, 1998 and 1997,
respectively. The increase in absolute dollars in 1998 was primarily comprised
of increases in personnel, travel, facility and commission costs. The increase
in personnel costs was the result of adding sales personnel to the direct sales
force. Direct sales personnel headcount increased to thirty at the end of the
second quarter of 1998 from twelve at the end of the second quarter of 1997. The
commission expense increase was attributable to higher sales. The Company
anticipates that sales and marketing expenses will increase in absolute dollars
but not vary significantly as a percentage of total revenue in the foreseeable
future as the Company continues its international expansion and increases its
reseller channel. The Company anticipates that sales and marketing expenses will
range from 30% to 35% in the foreseeable future.

     General and Administrative. General and administrative expenses consist
principally of personnel costs for administrative, finance, information systems,
human resources and general management personnel, as well as legal expenses and
facility costs. General and administrative expenses for the second quarter of
1998 increased by 96.4% to $917,000 from $467,000 for the second quarter of
1997. General and administrative expenses as a percentage of total revenues were
9.1% and 11.7% for the second quarters of 1998 and 1997, respectively. General
and administrative expenses for the six months ended June 30, 1998 increased by
103.4% to $1,698,000 from $835,000 for the six months ended June 30, 1997.
General and administrative expenses as a percentage of total revenue were 9.5%
and 11.6% for the six months ended June 30, 1998 and 1997, respectively. General
and administrative expenses have increased in absolute dollars for the quarter
and six-month period ended June 30, 1998 as compared to the corresponding
periods ended June 30, 1997 due to an increase in personnel, travel, information
technology and legal costs. These costs have increased due to an increase in
employees and the growth of the business. The Company anticipates that general
and administrative expenses will increase in absolute dollars but level off as a
percentage of total revenues ranging from 9% to 12% in the foreseeable future.

INTEREST INCOME

     Interest income of $571,000 and $483,000 for the second quarters of 1998
and 1997, respectively, resulted from investments of the Company's cash
balances. Interest income was $1,105,000 and $907,000 for the six-month periods
ended June 30, 1998 and 1997, respectively.

PROVISION FOR INCOME TAXES

     The Company's effective tax rate for the second quarter and six months
ended June 30, 1998 was approximately 37.5% compared to approximately 9.3% and
6.6% for the second quarter and six months ended June 30, 1997, respectively. In
the second quarter of 1997, the effective tax rate was significantly lower than
the statutory rate due to the utilization of net operating losses. A valuation
allowance was recorded until the fourth quarter of 1997 to offset the entire net
deferred tax assets as a result of the uncertainties regarding the realization
of these assets due to the Company's limited history of operating profits.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 1998, the Company's cash and cash equivalents, accounts
receivable and working capital increased to $45,444,000, $5,568,000 and
$39,633,000, respectively, compared to $40,428,000, $3,685,000 and $36,177,000,
respectively, at December 31, 1997.

     The Company generated cash in the amount of $6,031,000 from operations in
the six months ended June 30, 1998 compared to $4,660,000 in the corresponding
period of 1997. The improvement in cash flow from operations is primarily the
result of an increase in advance customer payments and more profitable
operations as a result of higher revenues.



                                       10



<PAGE>   11

     The Company used cash in investing activities of $1,794,000 and $1,245,000
in the six months ended June 30, 1998 and 1997, respectively. Capital
expenditures increased due to an increase in leasehold improvements for expanded
office space and due to the growth in personnel. The Company invested in
leasehold improvements due to the expansion of its corporate office from
approximately 31,800 square feet in 1997 to 67,000 square feet in 1998. The
Company generated cash in financing activities of $779,000 and $192,000 in the
six months ended June 30, 1998 and 1997, respectively. Financing activities
consisted primarily of sales of equity securities.

     As of June 30, 1998, the Company had no material commitments for capital
expenditures.

     The Company believes that existing cash balances and funds generated from
operations will be sufficient to meet its anticipated liquidity and working
capital requirements for at least the next twelve months.

IMPACT ON THE YEAR 2000 ISSUE

     The Company is aware of the issues associated with the programming code in
existing computer systems and software products as the millennium (Year 2000)
approaches. The Company has designed its products to, and has commenced efforts
to ensure that the computer systems and applications upon which it relies for
internal operations will, function properly beyond 1999. Based on an assessment
of its products to date, the Company believes that its products are compatible
with Year 2000 functionality. While the Company's Year 2000 compliance
evaluation is not yet complete, the Company does not at this time foresee a
material impact on its business or operating results from the Year 2000 problem.
There can be no assurance, however, that further assessment of the Company's
products and internal systems and applications will not indicate that additional
Company efforts to assure Year 2000 compliance are necessary, and such efforts
may be costly and may divert the Company's resources from other product
development or infrastructure improvement programs. The foregoing could result
in the loss of or delay in market acceptance of the Company's products and
services, increased service and warranty costs to the Company or payment by the
Company of compensatory or other damages. Further, there can be no assurance
that the systems operated by other companies upon which the Company relies will
be Year 2000 compliant on a timely basis. The Company's business, operating
results and financial condition could be materially adversely affected by the
failure of the Company's products and its internal systems and applications to
properly operate or manage data beyond 1999. Costs incurred in the compliance
effort will be expensed as incurred. Currently, the Company has not developed a
contingency plan should its products or internal systems fail to operate after
the Year 2000 but plans to develop such a contingency plan in the future.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

     The Company does not provide forecasts of future financial performance of
the Company. However, from time to time, information provided by the Company or
statements made by its employees may contain "forward-looking" information that
involves risks and uncertainties. In particular, statements contained in this
Form 10-Q that are not historical facts (including, but not limited to,
statements concerning services and other revenue, anticipated revenue under the
DEC Agreement, anticipated international revenues, anticipated cost of revenues
levels, anticipated operating expense levels and such expense levels relative to
the Company's total revenues) constitute forward-looking statements and are made
under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. The Company's actual results of operations and financial condition have
varied and may in the future vary significantly from those stated in any
forward-looking statements. Factors that may cause such differences include,
without limitation, the risks, uncertainties and other information discussed
below, as well as the accuracy of the Company's internal estimates of revenue
and operating expense levels. Each of these factors, and others, are discussed
from time to time in the filings made by the Company with the Securities and
Exchange Commission.

     The Company's future results are subject to substantial risks and
uncertainties. The Company has experienced substantial revenue growth since the
ICR product introduction and first achieved profitability in the first quarter
of 1996. However, due to the Company's limited operating history there can be no
assurance that such revenue growth and profitability will continue in the future
on a quarterly or annual basis. Future operating results will depend on many
factors, including the demand for the Company's products, the level of product
and price competition, the Company's success in expanding its direct sales
force, indirect distribution channels and international sales and the ability of
the Company to develop and market new products and control costs. In order to
support the growth of its business, the Company plans to significantly expand
its level of operations. Due to the anticipated increase in the Company's
operating expenses caused by this expansion, the Company's operating results
will be adversely affected if revenues do not increase. The Company currently
expects to derive substantially all of its revenues from licenses of the ICR and
Network ICR 


                                       11




<PAGE>   12

products and related services and to continue to be dependent upon a limited
number of customers for a significant portion of its revenues in future periods.
Although demand for the ICR and Network ICR has grown in recent quarters, the
call center market is still an emerging market. The Company's future financial
performance will depend in large part on continued growth in the number of
organizations adopting software applications to enhance their responsiveness to
customers and the number of applications developed for use in these
environments.

     The Company is dependent upon its ability to protect its proprietary
technology and relies upon a combination of patents, copyrights, trademarks,
trade secret laws and confidentiality procedures. There can be no assurance that
the protections put in place by the Company will be adequate. The Company
depends on a single vendor for the software and network adapter necessary for
the ICR to interface with the AT&T network. Although the Company has a
perpetual, fully-paid license, with access to the underlying source code for
this software and the rights to manufacture the network adapter, if for any
reason the vendor does not make the software or network adapter available to the
Company, there can be no assurance that the Company will be able to develop
these products on a timely basis.

     The Company's quarterly operating results may vary significantly in the
future depending on factors such as increased competition from the interexchange
carriers, Automatic Call Distribution switching system vendors and other
companies, the timing of new product announcements and changes in pricing
policies by the Company and its competitors, market acceptance of new and
enhanced versions of the Company's products, the size and timing of significant
orders, order cancellations by customers, changes in operating expenses, changes
in Company strategy, personnel changes, the Company's ability to manage growth,
if any, including the continued improvement in its financial and management
controls and growth of its employee work force and general economic factors. The
Company's expense levels are based, in part, on its expectations of future
revenues and to a large extent are fixed in the short-term. If revenue levels
are below expectations, the Company's business, operating results and financial
condition are likely to be materially adversely affected. Net income may be
disproportionately affected by a reduction in revenues because a proportionately
smaller amount of the Company's expenses varies with its revenues. As a result,
the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. Additional information on the factors that
could affect the Company's financial results is included in the Company's 1997
Amended Form 10-K, which has been filed with the Securities and Exchange
Commission.

     International sales accounted for approximately 27.7% and 21.9% of the
Company's revenues for the six months ended June 30, 1998 and 1997,
respectively. As part of its business strategy, the Company is seeking
opportunities to expand its products into international markets. The Company
believes that such expansion is important to the Company's ability to continue
to grow and to market its products and services. In marketing its products and
services internationally, however, the Company will face new competitors, some
of whom may have established strong relationships with carriers. In addition,
the ability of the Company to enter the international markets will be dependent
upon the Company's ability to integrate its products with local proprietary
networks in foreign countries. There can be no assurance that the Company will
be successful in integrating its products with these proprietary networks or
marketing or distributing its products abroad or that, if the Company is
successful, its international revenues will be adequate to offset the expense of
establishing and maintaining international operations. Additionally, there can
be no assurance that the Company will be successful in integrating its product
in international markets and such revenues are subject to a number of risks
including compliance with regulatory requirements, export restrictions and
controls, international trade barriers, protection of intellectual property
rights, management of international operations, collection of receivables,
political instability, currency exchange rate fluctuation and potentially
adverse tax consequences. To date, the Company has limited experience in
marketing and distributing its products internationally. In addition to the
uncertainty as to the Company's ability to establish an international presence,
there are certain difficulties and risks inherent in doing business on an
international level, such as compliance with regulatory requirements and changes
in these requirements, export restrictions, export controls relating to
technology, tariffs and other trade barriers, protection of intellectual
property rights, difficulties in staffing and managing international operations,
longer payment cycles, problems in collecting accounts receivable, political
instability, fluctuations in currency exchange rates and potentially adverse tax
consequences. There can be no assurance that one or more of such factors will
not have a material adverse effect on any international operations established
by the Company and, consequently, on the Company's business, operating results
and financial condition.



                                       12


<PAGE>   13



PART II.   OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

On November 20, 1996, the Company's Registration Statement of Form S-1 (File No.
333-13263) became effective. The net proceeds from the offering were
approximately $26,704,000. To date, the Company has utilized approximately
$756,000 of the proceeds to repay borrowings under its outstanding equipment
lines of credit. The Company has not used any of the remaining proceeds from the
effective date (November 20, 1996) through June 30, 1998. No payments were made
to directors, officers (except in their capacity as employees of the Company) or
to persons owning ten percent or more of any class of equity securities of the
Company, or to the affiliates of the Company.

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

At the Company's Annual Meeting of Stockholders held on May 28, 1998, the
following proposals were adopted by the vote specified below:

<TABLE>
<CAPTION>
                                                             FOR            AGAINST         ABSTAIN         WITHHOLD
                                                         ----------         -------         -------         --------
     <S>                                                 <C>                <C>              <C>            <C>
     1. To elect two directors to serve for a three
        year term

        Alexander V. d'Arbeloff                          11,856,523         79,500
        Gardner C. Hendrie                               11,855,323         80,700
     2. To ratify the selection by the Board of
        Directors of Coopers & Lybrand L.L.P. as
        independent public accountants for the
        Company for 1998                                 11,921,547          8,673           5,803
</TABLE>

The other directors whose terms of office continued after the Annual Meeting of
Stockholders are Louis J. Volpe, Gary Bowen, W. Michael Humphreys and John C.
Thibault.

ITEM 5. OTHER INFORMATION.

The Company's by-laws establish an advance notice procedure with regard to
certain matters, including stockholder proposals not included in the Company's
proxy statement to be brought before an annual meeting of stockholders.
Proposals of stockholders intended for inclusion in the Proxy Statement to be
furnished to all stockholders must be received at the Company's principal
executive offices not later than December 23, 1998. The deadline for providing
timely notice to the Company of matters that stockholders otherwise desire to
introduce at the next Annual Meeting of stockholders of the Company is February
21, 1999, and such notice must contain specified information concerning the
matters to be brought before such meeting, the stockholder proposing such
matters and a representation that the stockholder is entitled to vote and
intends to appear at the annual meeting of stockholders. All notices of
proposals by stockholders should be sent to the attention of: Timothy J. Allen
at GeoTel Communications Corporation, 900 Chelmsford St., Lowell, Ma 01851

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits:

     Exhibit 10.1  Amended and Restated 1996 Employee Stock Purchase Plan
     Exhibit 10.2  1998 Non-Executive Employee Stock Option Plan
     Exhibit 27.1  Financial Data Schedule

(b)  Reports on Form 8-K.

     The Company did not file a Form 8-K during the quarter ended June 30, 1998.



                                       13


<PAGE>   14


                                   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.

                             GEOTEL COMMUNICATIONS CORPORATION

                             (Registrant)
August 11, 1998              /s/ Timothy J. Allen
                             ---------------------------------------------------
                             Timothy J. Allen
                             Vice President of Finance, Chief Financial Officer,
                             Treasurer and Secretary
                             (Principal Financial and Chief Accounting Officer)







                                       14