<PAGE>
 
                                UNITED STATES

                     SECURITIES AND EXCHANGE COMMISSION

                           Washington, D.C. 20549

                                  FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 1997

                                     OR

(   )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

             For the Transition Period from ________ to ________

                     Commission File Number:  000-23774

                         ASCEND COMMUNICATIONS, INC.
           (Exact name of registrant as specified in its charter)

           Delaware                                  94-3092033

(State or other jurisdiction of                   (I.R.S. Employer
 incorporation or organization)                 Identification No.)


                              One Ascend Plaza
                           1701 Harbor Bay Parkway
                          Alameda, California 94502
                               (510) 769-6001

   (Address of principal executive offices, zip code and telephone number)

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 Common Stock, $0.001 par
value, was 189,561,817 as of September 30, 1997.

This report, including exhibits, consists of 27 pages.  The Index To Exhibits is
found on page 25.
<PAGE>
 
<TABLE>
<CAPTION>

                         ASCEND COMMUNICATIONS, INC.

                                  FORM 10-Q

                              TABLE OF CONTENTS


Part I:  Financial Information                                          Page No.
                                                                        --------
     <S>                                                                <C> 
     Item 1: Financial Statements (Unaudited)
 
             Condensed Consolidated Balance Sheets as of
             September 30, 1997 and December 31, 1996                      3
 
             Condensed Consolidated Statements of Operations for the
             Quarters and Nine Months Ended September 30, 1997 and 1996    4
 
             Condensed Consolidated Statements of Cash Flows for
             the Nine Months Ended September 30, 1997 and 1996             5 
                                                                             
             Notes to Condensed Consolidated Financial Statements          6 
                                                                             
     Item 2: Management's Discussion and Analysis of Financial       
             Condition and Results of Operations                           12 
 
 
Part II:  Other Information
 
     Item 6: Exhibits and Reports on Form 8-K                              22
 
             A:  Exhibits                                                  22
 
             B:  Reports on Form 8-K                                       23
 
             Signatures                                                    24
 
             Index to Exhibits                                             25
</TABLE>

                                       2
<PAGE>
 
Part I:    Financial Information
Item I:    Financial Statements

                          ASCEND COMMUNICATIONS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                   UNAUDITED
                                (In Thousands)

<TABLE> 
<CAPTION>
                                               SEPT. 30,         DEC. 31,
                                                 1997             1996
                                             ------------      -----------
<S>                                          <C>               <C>
Current Assets:
Cash and cash equivalents.................   $   242,597       $  312,369
  Short-term investments..................       264,873          173,101
  Accounts receivable, net................       236,478          185,094
  Inventories.............................       125,142           68,544
  Deferred income taxes...................        64,352           41,789
  Other current assets....................        21,871           26,444
                                             ------------      -----------
    Total current assets..................       955,313          807,341

Investments...............................        85,668           35,771
Furniture, fixtures and equipment, net....       104,225           73,046
Other assets..............................         4,694            5,969
                                             ------------      -----------
    Total assets..........................   $ 1,149,900       $  922,127
                                             ============      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable........................   $    75,437       $   60,823
  Accrued liabilities and accrued
    compensation..........................       180,193           94,071
                                             ------------      -----------
    Total current liabilities.............       255,630          154,894

Commitments

Stockholders' equity:
  Common Stock............................           190              182
  Addtional paid-in capital...............       851,044          533,515
  Retained earnings.......................        43,036          233,536
                                             ------------      -----------
    Total stockholders' equity............       894,270          767,233
                                             ------------      -----------
    Total liabilities and stockholders'
      equity..............................   $ 1,149,900       $  922,127
                                             ============      ===========
</TABLE>
         
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       3
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   UNAUDITED
                     (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                          Quarter Ended Sept. 30,    Nine Months Ended Sept. 30,
                                          -----------------------    ---------------------------
                                               1997       1996              1997       1996
                                            ---------   --------         ---------   --------
<S>                                       <C>           <C>          <C>             <C> 
Net sales.............................      $ 270,372   $248,836         $ 874,805   $602,482
Cost of sales.........................         97,181     86,929           308,245    212,136
                                            ---------   --------         ---------   --------
  Gross profit........................        173,191    161,907           566,560    390,346
Operating expenses:
  Research and development............         40,706     25,314           115,595     64,061
  Sales and marketing.................         66,499     42,172           179,616    105,328
  General and administrative..........          8,475      7,670            27,019     21,523
  Purchased research and development..              -          -           231,100          -
  Cost of mergers.....................              -     13,900           150,271     13,900
                                            ---------   --------         ---------   --------
    Total operating expenses..........        115,680     89,056           703,601    204,812
                                            ---------   --------         ---------   --------

Operating income (loss)...............         57,511     72,851          (137,041)   185,534
Interest income, net..................          6,161      4,406            17,739     12,355
                                            ---------   --------         ---------   --------

Income (loss) before income taxes.....         63,672     77,257          (119,302)   197,889
Provision for income taxes............         23,544     32,100            52,648     78,487
                                            ---------   --------         ---------   --------
Net income (loss).....................      $  40,128   $ 45,157         $(171,950)  $119,402
                                            =========   ========         =========   ========

Net income (loss) per share...........      $    0.20   $   0.23         $   (0.92)  $   0.61
                                            =========   ========         =========   ========
Number of shares used in per share
  calculation.........................        199,838    196,502           187,920    195,206
                                            =========   ========         =========   ========
</TABLE>
                   

           See notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   UNAUDITED
                                (In Thousands)

<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED SEPT. 30
                                                                -------------------------------
                                                                      1997              1996
                                                                ------------      -------------
<S>                                                             <C>               <C>
Operating activities:

Net income (loss).......................................        $   (171,950)       $   119,402

Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
    Depreciation and amortization.......................              31,798             14,309
    Purchased research and development..................             231,100                  -
    Cost of mergers.....................................             150,271             13,900
    Deferred income taxes...............................             (14,490)            (6,159)

  Changes in operating assets and liabilities:
    Accounts receivable.................................             (60,713)           (86,951)
    Inventories.........................................             (68,302)           (29,780)
    Other current assets................................               5,822            (10,025)
    Other assets........................................               2,358             (2,616)
    Accounts payable....................................              11,336             14,136
    Accrued liabilities and accrued compensation........             (34,406)               677
                                                                ------------        -----------
       Net cash provided by operating activities........              82,824             26,893
                                                                ------------        -----------

Investing activities:
    Purchases of investments............................            (403,247)          (160,288)
    Maturities and sales of investments.................             261,578            126,945
    Purchases of furniture, fixtures and equipment......             (83,494)           (45,989)
    Effect of business combinations.....................              (9,361)             2,830
                                                                ------------        -----------
        Net cash used in investing activities...........            (234,524)           (76,502)
                                                                ------------        -----------

Financing activities:
    Proceeds from issuance of common stock, net.........              44,753             38,830
    Payment of notes payable............................                   -             (2,108)
    Tax benefit related to exercise of stock options....              37,175             62,015
                                                                ------------        -----------
       Net cash provided by financing activities........              81,928             98,737
                                                                ------------        -----------

Net increase (decrease) in cash and cash equivalents....             (69,722)            49,128
Cash and cash equivalents, beginning of period..........             312,369            202,524
                                                                ------------        -----------
Cash and cash equivalents, end of period................        $    242,597        $   251,652
                                                                ============        ===========
Supplemental non-cash investing and financing activities:

    Liabilities assumed in business combination.........        $      9,600        $         -
                                                                ============        ===========

    Exercise of warrants in exchange for retirement of
        notes payable...................................        $         -         $     2,068
                                                                ============        ===========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   UNAUDITED

General

Ascend Communications, Inc. develops, manufactures and sells wide area
networking solutions for telecommunications carriers, Internet service providers
and corporate customers worldwide that enable them to build: (i) Internet access
systems consisting of point-of-presence termination ("POP") equipment for
Internet service providers ("ISPs") and remote site Internet access equipment
for Internet subscribers; (ii) telecommunications carrier and ISP backbone
networks utilizing high speed Frame Relay, Asynchronous Transfer Mode ("ATM")
and Internet Protocol ("IP") switches; (iii) extensions and enhancements to
corporate backbone networks that facilitate access to these networks by remote
offices, telecommuters and mobile computer users; and (iv) videoconferencing and
multimedia access facilities. The Company's products support existing digital
and analog networks.

In February 1997, the Company purchased InterCon Systems Corporation
("InterCon"), a leading developer of remote access client software products for
both corporate and ISP markets.  The transaction was accounted for as a
purchase.  The operations of InterCon have been included for periods subsequent
to the acquisition (see "Business Combinations").

On April 1, 1997, the Company acquired Whitetree, Inc. ("Whitetree"), a
developer and manufacturer of high speed ATM switching products.  The
transaction was accounted for as a pooling of interests. The operations of
Whitetree have been included for periods subsequent to the acquisition. The
Company's historical consolidated financial statements prior to the combination
have not been restated to reflect the financial results of Whitetree as these
results were not material to the Company (see "Business Combinations").

On June 30, 1997, the Company acquired Cascade Communications Corp. ("Cascade"),
a leading developer and manufacturer of carrier class Frame Relay, ATM and IP
switching products. The transaction was accounted for as a pooling of interests.
The consolidated financial statements of Ascend for prior periods have been
restated to include the financial position and results of operations of Cascade
(see "Business Combinations").

On January 28, 1997, Cascade completed its acquisition of Sahara Networks, Inc.
("Sahara"), a privately held developer of scaleable high-speed broadband access
products. The acquisition was accounted for under the purchase method of
accounting. The operations of Sahara have been included for periods subsequent
to the acquisition.

The interim condensed consolidated financial statements of Ascend
Communications, Inc. have been prepared by the Company without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.

                                       6
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Continued)

General (continued)

The information included in this report should be read in conjunction with the
Company's audited financial statements and notes thereto included in the
Company's Registration Statement on Form S-4/A (No. 333-25287) filed on April
22, 1997 in connection with the acquisition of Cascade and the Company's and
Cascade's 1996 Annual Reports on Form 10-K.

In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) necessary to summarize fairly the financial
position, results of operations and cash flows for such periods.  The results
for the interim period ended September 30, 1997 are not necessarily indicative
of the results that may be expected for any future periods.

Concentration of Credit Risk

The Company sells and distributes a substantial percentage of its products to
ISPs, value-added resellers and distributors, and local and long-distance
telecommunications carriers throughout North America, Europe and  Asia and the
Pacific Basin. Accounts receivable are principally from these customers. The
Company conducts ongoing credit evaluations of its customers and maintains
reserves for potential credit losses.

Inventories

Inventories are stated at the lower of cost (determined by the first-in, first-
out method) or market.  Inventories consist of (in thousands):

<TABLE> 
<CAPTION> 
                                Sept. 30,        Dec. 31,
                                  1997             1996
                                --------         --------
<S>                             <C>             <C> 
Finished goods................  $ 12,001         $ 10,778
Products in process...........    20,231            7,544
Raw material and supplies.....    92,910           50,222
                                --------         --------
                                $125,142         $ 68,544
                                ========         ========
</TABLE> 
 

                                       7
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Continued)

Commitments

In March 1996, the Company entered into an agreement to lease 13 acres of land
located in Alameda, California. Certain buildings currently being used for the
Company's headquarters have been constructed on the land. The lessor has funded
approximately $24.9 million for the land and construction of the buildings. The
lease has an initial term of five years and an option to renew for two years,
subject to the lessor's consent. The rent obligation for the lease commenced in
December 1996. At any time during the term of the lease, the Company may
purchase the land and buildings. If the Company does not exercise its purchase
option at the end of the lease, the Company has guaranteed a residual value of
approximately $22.4 million.

Income Taxes

For the nine months ended September 30, 1997, the Company's income taxes
currently payable for both federal and state purposes have been reduced by a tax
benefit of approximately $37.2 million from stock option transactions which was
credited directly to stockholders' equity.  The Company made cash payments of
approximately $9.6 million and $46.8 million for income taxes during the nine
months ended September 30, 1997 and 1996, respectively.

Earnings Per Share

Earnings per share for the quarters and nine months ended September 30, 1997 and
1996 were computed based on the weighted average outstanding number of common
and common equivalent shares except for the nine months ended September 30, 1997
which exclude common equivalent shares as they are anti-dilutive for such
period. The computations of the weighted average number of shares outstanding
for the quarters and nine months ended September 30, 1997 and 1996 are as
follows (in thousands, except per share data):

<TABLE> 
<CAPTION> 

                             Quarter Ended Sept. 30,   Nine Months Ended Sept. 30,
                                1997          1996        1997         1996
                             ----------    ----------  ----------   ----------- 
<S>                          <C>           <C>        <C>           <C> 
Common Stock.................   189,562       179,469     187,920     177,464
Common Stock Equivalent......    10,276        17,033          --      17,742
                               --------      --------   ---------    --------
Total........................   199,838       196,502     187,920     195,206
                               ========      ========   =========    ========
Net Income (Loss)............  $ 40,128      $ 45,157   $(171,950)   $119,402
                               ========      ========   =========    ========
Net Income (Loss) Per Share..  $   0.20      $   0.23   $   (0.92)   $   0.61
                               ========      ========   =========    ========
</TABLE> 

                                       8
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Continued)

Recent Accounting Pronouncements

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to result in an increase
in primary earnings per share of $0.02 and $0.06 for the quarter and nine months
ended September 30, 1996, respectively, and an increase of $0.01 per share for
the quarter ended September 30, 1997. There is no effect on the earnings per
share for the nine months ended September 30, 1997 as the common stock
equivalents are already excluded as they are anti-dilutive for such period.

Business Combinations

On June 30, 1997, the Company acquired Cascade in a transaction that was
accounted for as a pooling of interests.  The Company issued approximately
66,346,000 shares of its common stock to Cascade stockholders in exchange for
all outstanding Cascade shares.  Outstanding options to purchase Cascade common
stock were converted to options to purchase approximately 8,455,000 shares of
Ascend common stock.  The historical consolidated financial results of Ascend
for prior periods have been restated to include the financial position and
results of operations of Cascade.  The following table shows the historical
results of Ascend and Cascade for the periods prior to the consummation of the
merger of the two entities:

<TABLE>
<CAPTION>
                                                                Three Months    
                                                                   Ended
                                                                  March 31,            Year Ended Dec. 31,
                                                                ------------    ---------------------------------
                                                                    1997           1996         1995        1994  
                                                                ------------    ---------     --------    -------
<S>                                                             <C>             <C>           <C>         <C> 
Net Sales:            Ascend...................................    $ 202,412    $ 549,297     $152,604    $39,655
                      Cascade..................................       90,328      340,976      134,834     50,060
                                                                   ---------    ---------     --------    -------
                        Total..................................    $ 292,740      890,273      287,438     89,715
                                                                   =========    =========     ========    =======
-----------------------------------------------------------------------------------------------------------------
Net Income (loss):    Ascend...................................    $  35,093    $ 113,111     $ 27,535    $ 6,550
                      Cascade..................................     (198,334)      70,779       25,410      9,266
                                                                   ---------    ---------     --------    -------
                        Total..................................     (163,241)     183,890       52,945     15,816
                                                                   ---------    ---------     --------    -------
                      Pro Forma effect of Sahara acquisition...         (984)      (7,332)           _          -
                      Pro Forma exclusion of purchased
                        research and development:
                          InterCon, net of income taxes........       11,160            -            -          -
                          Sahara...............................      213,100            -            -          -
                                                                   ---------    ---------     --------    -------
                      Pro forma net income, as restated........    $  60,035    $ 176,558     $ 52,945    $15,816
                                                                   =========    =========     ========    =======
</TABLE>
                 
                                       9
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Continued)

Business Combinations (continued)

In February 1997, the Company acquired all of the outstanding stock of InterCon.
The purchase price consisted of a cash payment of $12.0 million, the assumption
of approximately $9.0 million of liabilities and transaction costs of
approximately $600,000.  The acquisition was accounted for under the purchase
method of accounting.  Accordingly, the total purchase price of $21.6 million
was allocated to the net assets acquired based upon their estimated fair values.
The estimated fair value of tangible net assets acquired was $600,000.  In
addition, $18.0 million of the purchase price was allocated to purchased
research and development that had not reached technological feasibility and that
had no alternative future use, and $3.0 million was allocated to purchased
software.

On April 1, 1997, the Company acquired Whitetree in a transaction that was
accounted for as a pooling of interests. The Company issued approximately
1,315,000 shares of its common stock to Whitetree shareholders in exchange for
all outstanding Whitetree shares. In addition, the Company assumed all
outstanding Whitetree stock options to purchase approximately 99,000 shares of
the Company's stock. The results of operations of Whitetree, which have not been
material in relation to those of the Company, are included in the consolidated
results of operations for periods subsequent to the acquisition. The Company's
historical consolidated financial statements prior to the combination have not
been restated to reflect the financial results of Whitetree as these results
were not material to the Company.

On January 28, 1997, Cascade completed its acquisition of Sahara. Cascade issued
approximately 3.4 million shares of Cascade common stock in exchange for all the
outstanding shares of Sahara. In addition, Cascade assumed all outstanding
Sahara stock options to purchase approximately 400,000 shares of Cascade common
stock. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price of approximately $219.0 million was
allocated to the net assets acquired based upon their estimated fair market
value. The estimated fair value of the tangible net assets acquired was
approximately $6.0 million. In addition, approximately $213.0 million of the
purchase price was allocated to in-process research and development that had not
reached technological feasibility and that had no alternative future use.

                                       10
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Continued)

Litigation

On April 16, 1997, a civil action was filed against Sahara, its three founders
and ten employees of Sahara by General Datacomm Industries, Inc. in the Superior
Court for the State of Connecticut.  The complaint alleges several causes for
action, including: breach of contract; tortious interference with contractual
relations; misappropriation of trade secrets; unfair competition and violation
of the Connecticut Unfair Trade Practices Act. The plaintiff seeks relief of
unspecified monetary damages, costs and injunctive relief. Based on the
Company's preliminary investigation, the Company believes the allegations of the
lawsuit are without merit and plans to vigorously defend this lawsuit; however,
the ultimate outcome of this matter cannot yet be determined. No provision for
any liability that may result from the action has been recognized in the
consolidated financial statements. In the opinion of management, resolution of
this litigation is not expected to have a material adverse effect on the
financial position of the Company. However, depending on the amount and timing,
an unfavorable resolution of this matter could materially affect the Company's
future results or cash flows in a particular period.

On April 18, 1997, the Company received a claim and request for royalties
alleging patent infringement on four separate patents. Subsequently, the claim
and request for loyalties was amended to include four additional patents. The
Company is currently investigating the claims of such infringement and thus the
ultimate outcome of this claim cannot yet be determined. No provision for any
liability that may result from the claim has been recognized in the consolidated
financial statements. In the opinion of management, resolution of this matter is
not expected to have a material adverse effect on the financial position of the
Company. However, depending on the amount and timing, an unfavorable resolution
of this matter could materially affect the Company's future results or cash
flows in a particular period.

                                       11
<PAGE>
 
Item 2:  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

                          ASCEND COMMUNICATIONS, INC.


This Report contains forward-looking statements which reflect the current views
of the Company with respect to future events that will have an effect on its
future financial performance.  These statements include the words "expects,"
"believes," "estimates," and similar expressions.  These forward-looking
statements are subject to various risks and uncertainties, including those
referred to under "Factors That May Affect Future Results" and elsewhere herein,
that could cause actual future results to differ materially from historical
results or those currently anticipated.  Readers are cautioned not to place
undue reliance on these forward-looking statements.

The information set forth below should be read in conjunction with the unaudited
interim condensed consolidated financial statements and notes thereto included
in Part 1 - Item 1 of this Quarterly Report and the audited financial statements
and notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations for the year ended December 31, 1996
contained in the Company's Registration Statement on Form S-4/A (No. 333-25287)
filed on April 22, 1997 in connection with the acquisition of Cascade and the
Company's and Cascade's 1996 Annual Reports on Form 10-K.

Results of Operations

The following table sets forth, for the periods indicated, the percentage of net
sales represented by certain line items from the Company's Condensed
Consolidated Statements of Operations for the quarter and nine months ended
September 30, 1997 and 1996, respectively:



<TABLE>
<CAPTION>
                                            Quarter Ended Sept. 30,   Nine Months Ended Sept. 30,
                                            -----------------------   ---------------------------
                                               1997        1996             1997        1996
                                               ----        ----             ----        ----
<S>                                         <C>            <C>        <C>               <C>
Net sales................................       100%        100%             100%        100%
Cost of sales............................        36          35               35          35
                                               ----        ----             ----        ----
  Gross margin...........................        64          65               65          65
Operating expenses:
  Research and development...............        15          10               13          11
  Sales and marketing....................        24          17               21          17
  General and administrative.............         3           3                3           4
  Purchased research and development.....         -           -               27           -
  Cost of mergers........................         -           6               17           2
                                               ----        ----             ----        ----
    Total operating expenses.............        42          36               81          34
                                               ----        ----             ----        ----
Operating income (loss)..................        22          29              (16)         31
Interest income, net.....................         2           2                2           2
                                               ----        ----             ----        ----
Income (loss) before income taxes........        24          31              (14)         33
Provision for income taxes...............         9          13                6          13
                                               ----        ----             ----        ----

Net income(loss).........................        15%         18%             (20)%        20%
                                               ====        ====             ====        ====
</TABLE>
                   

           See notes to condensed consolidated financial statements.

                                       12
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.


Net Sales

Net sales for the quarter ended September 30, 1997 were $270.4 million, an
increase of 9% over net sales of $248.8 million for the third quarter of 1996.
Net sales for the nine months ended September 30, 1997 were $874.8 million, an
increase of 45% over net sales of $602.5 million for the nine months ended
September 30, 1996. UUNET, an Internet service provider, accounted for
approximately 15% and 10% of net sales for the quarters ended September 30, 1997
and 1996, respectively. UUNET accounted for approximately 16% of net sales for
the nine months ended September 30, 1997.  International sales accounted for
approximately 29% of net sales for the quarter ended September 30, 1997 compared
to 36% of net sales for the same period in 1996.  International sales accounted
for approximately 33% of net sales for the nine months ended September 30, 1997
compared to 34% of net sales for the same period in 1996.  These decreases were
principally due to decreased sales of the Company's products in Europe and
Japan.

The following table provides a breakdown of net sales by business unit as a
percentage of total Company net sales for the quarters and nine months ended
September 30, 1997 and 1996, respectively:

<TABLE>
<CAPTION>
                               Quarter Ended Sept. 30,   Nine Months Ended Sept. 30,
                               -----------------------   ---------------------------
    BUSINESS UNIT                 1997        1996             1997        1996
------------------------          ----        ----             ----        ----
<S>                            <C>            <C>        <C>               <C>
Access Concentrators........       50%          49%              55%         47%
Core Switching..............       36           36               33          37
Remote Access...............        5            7                5           8
Multimedia..................        4            5                3           6
Other.......................        5            3                4           2
                                  ---          ---              ---         ---
   Total Company............      100%         100%             100%        100%
                                  ===          ===              ===         ===
</TABLE>

Access Concentrators - The Access Concentrators business unit is composed of the
MAX family of products.   MAX products accounted for 50% and 49% of total
Company net sales for the quarters ended September 30, 1997 and 1996,
respectively.  MAX products accounted for 55% and 47% of total Company net sales
for the nine months ended September 30, 1997 and 1996, respectively.  The
increase in unit shipments of MAX products was primarily attributable to the
growth in business from Internet service providers ("ISP's") and increased
demand for corporate remote networking applications.

                                       13

<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

Net Sales (continued)

Core Switching The Core Switching business unit is composed of the BSTDX
family of Frame Relay switches, the CBX500 family of ATM switches and the GRF
family of Internet Protocol ("IP") switches. B-STDX products accounted for 25%
and 31% of total Company net sales for the quarters ended September 30, 1997
and 1996, respectively. BSTDX products accounted for 25% and 34% of total
Company net sales for the nine months ended September 30, 1997 and 1996,
respectively. The decline in BSTDX sales as a percent of net sales was
primarily attributable to the increase in the sales of the MAX family of
products. CBX500 products accounted for 9% and 4% of total Company net sales
for the quarters ended September 30, 1997 and 1996, respectively. CBX500
products accounted for 6% and 2% of total Company net sales for the nine
months ended September 30, 1997 and 1996, respectively. GRF products, which
were first shipped in volume in the first quarter of 1997, accounted for 2% of
total Company net sales for both the quarter and the nine months ended
September 30, 1997.

Remote Access  The Remote Access business unit is composed of the Pipeline
family of products.  Pipeline products accounted for 5% and 7% of total Company
net sales for the quarters ended September 30, 1997 and 1996, respectively.
Pipeline products accounted for 5% and 8% of total Company net sales for the
nine months ended September 30, 1997 and 1996, respectively.  The decline of
Pipeline net sales as a percent of total Company net sales was primarily
attributable to the increase in the sales of the MAX family of products
and price reductions of the Pipeline products due to increased competition.

Multimedia  The Multimedia business unit is composed of the Multiband family of
products and the MAX Video family of products. Multimedia products accounted for
4% and 5% of total Company net sales for the quarters ended September 30, 1997
and 1996, respectively.  Multimedia products accounted for 3% and 6% of total
Company net sales for the nine months ended September 30, 1997 and 1996,
respectively.  The decline of Multimedia net sales as a percent of total Company
net sales was primarily attributable to the increase in the sales of the
MAX family of products.

Gross Margin

Gross margin was 64% and 65% for the quarters ended September 30, 1997 and 1996,
respectively.  The decrease in gross margin for the quarter ended September 30,
1997 was primarily due to increased manufacturing period costs. Gross margin was
65% for both the nine months ended September 30, 1997 and 1996.  In the future,
the Company's gross margins may be affected by several factors, including the
mix of products sold, the price of products sold, the introduction of new
products with lower gross margins, the distribution channels used, price
competition, increases in material costs and changes in other components of cost
of sales.

                                       14
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

Research and Development

Research and development expenses increased 61% to $40.7 million in the third
quarter of 1997 from $25.3 million in the third quarter of 1996. Research and
development expenses increased 80% to $115.6 million for the nine months ended
September 30, 1997 from $64.1 million for the nine months ended September 30,
1996. Research and development expenses as a percent of net sales increased to
15% for the third quarter of 1997 compared to 10% for the same quarter of 1996.
Research and development expenses as a percent of net sales increased to 13% for
the first nine months of 1997 compared to 11% for the same period of 1996. These
increases were primarily due to the addition of engineering personnel, payments
for consulting services in connection with developing and enhancing the
Company's existing and new products, payments for consulting services related to
filing applications and product testing required to obtain governmental
approvals to resell the Company's products outside of North America, addition of
research and development laboratory equipment and material costs associated with
new product prototypes. In addition, research and development expenses increased
in part through the addition of engineering personnel and facilities as a result
of the Company's merger and acquisition activities.

Sales and Marketing

Sales and marketing expenses increased 58% to $66.5 million for the third
quarter of 1997 from $42.2 million for the third quarter of 1996. Sales and
marketing expenses increased 71% to $179.6 million for the first nine months of
1997 from $105.3 million for the same period of 1996. Sales and marketing
expenses as a percent of net sales increased to 24% for the third quarter of
1997 as compared to 17% for the same quarter of 1996. Sales and marketing
expenses as a percent of net sales increased to 21% for the first nine months of
1997 as compared to 17% for the same period of 1996. These increases were
primarily due to the addition of sales, marketing and technical support
personnel, increased commissions, spending for marketing materials and trade
shows, advertising and promotions, expenditures for demonstration and loaner
equipment used by customers, and expenses associated with opening additional
sales offices in North America, Europe and Asia and the Pacific Basin. The
growth in sales, marketing and technical support personnel was primarily due to
the need to manage the activities of an increased number of value-added
resellers and distributors, end-user customers and new products.

General and Administrative

General and administrative expenses increased 11% to $8.5 million for the third
quarter of 1997 from $7.7 million for the third quarter of 1996. General and
administrative expenses increased 26% to $27.0 million for the first nine months
of 1997 from $21.5 million for the first nine months of 1996. This increase was
primarily due to the addition of finance, information systems and administrative
personnel, accruals for performance bonuses, increased facilities costs and the
cost of investor relations activities.  General and administrative expenses as a
percent of net sales were 3% for the quarters ended September 30, 1997 and 1996.
General and administrative expenses as a percent of net sales decreased to 3%
for the nine months ended September 30, 1997 from 4% for the same period of
1996.  This decrease in general and administrative expenses as a percentage of
net sales was due primarily to increased net sales.

                                       15
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.


Purchased Research and Development

Purchased research and development costs were $231.1 million for the first nine
months of 1997.  These costs were for the purchase of technology and related
assets associated with the acquisitions of InterCon Systems Corporation and
Sahara Networks, Inc. during the first quarter of 1997. These acquisitions
provide technology and expertise that the Company is using to enhance and expand
the breadth of its offerings to end-user markets.

Cost of Mergers

For the nine months ended September 30, 1997, the Company charged to operations
one-time merger costs of approximately $150.3 million.  These costs related to
the acquisitions of Cascade Communications Corp. and Whitetree, Inc. and
consist primarily of investment and professional fees and other direct costs
associated with the merger.  Of the $150.3 million in one-time merger costs,
approximately $44.9 million are not deductible for tax purposes.

Interest Income, Net

Interest income (net) increased by approximately $1.8 million to $6.2 million
(2% of net sales) for the third quarter of 1997 compared to $4.4 million for the
same quarter of 1996. Interest income (net) increased by approximately $5.3
million to $17.7 million (2% of net sales) for the first nine months of 1997
compared to $12.4 million for same period of 1996. This increase in interest
income (net) is due primarily to the investment of proceeds from the exercise of
stock options and issuance of common stock in connection with the Company's
employee and outside director stock plans and cash from operations.

Provision for Income Taxes

The Company's effective tax rate for the quarter and nine months ended September
30, 1997 was 37.0% and 37.6%, respectively, exclusive of the effect of one-time
non-deductible in-process research and development expenses and certain merger
related expenses. The effective tax rate for the quarter and nine months ended
September 30, 1996 was 38.2% and 38.3%, respectively, exclusive of the effect of
one time non-deductible merger related expenses. The lower effective tax rate
for 1997 is primarily attributable to a larger benefit from the Company's
Foreign Sales Corporation.

                                       16
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

Liquidity and Capital Resources

At September 30, 1997, the Company's principal sources of liquidity included
$593.1 million of cash and cash equivalents, short-term investments and
investments, and an unsecured $15.0 million revolving line of credit which
expires in November 1997.  There were no borrowings under the line of credit
during the nine months ended September 30, 1997.  The decrease in cash and cash
equivalents of $69.8 million for the period was principally due to $234.5
million of funds used in investing activities, partially offset by $81.9 million
of proceeds from, and tax benefits related to, the exercise of stock options and
issuance of common stock in connection with the Company's employee and outside
director stock plans and by $82.8 million of funds provided by operations.   The
net cash provided by operating activities for the nine months ended September
30, 1997 was primarily due to increases in accrued liabilities, accrued
compensation and accounts payable and increased net income adjusted for
depreciation, purchased research and development, cost of mergers and deferred
income taxes, partially offset by increases in accounts receivable and
inventories.

Net cash used in investing activities of $234.5 million for the nine months
ended September 30, 1997 related primarily to net purchases, maturities and
sales of investments, expenditures for furniture, fixtures, and equipment and
the effect of business combinations.  Financing activities provided $81.9
million for the nine months ended September 30, 1997, primarily due to proceeds
from, and tax benefits related to, the exercise of stock options and issuance of
common stock in connection with the Company's employee and outside director
stock plans.

At September 30, 1997, the Company had $699.7 million in working capital.  The
Company currently has no significant capital commitments other than commitments
under facilities and operating leases.  The Company believes that its available
sources of funds and anticipated cash flow from operations will be adequate to
finance current operations, anticipated investments and capital expenditures for
at least the next twelve months.


Factors That May Affect Future Results

The Company's quarterly and annual operating results are affected by a wide
variety of risks and uncertainties as discussed in the Company's Registration
Statement on Form S-4/A (No. 333-25287) filed on April 22, 1997 in connection
with the acquisition of Cascade and the Company's and Cascade's Annual Reports
for the year ended December 31, 1996 on Form 10-K. This Report on Form 10-Q
should be read in conjunction with such Forms S-4 and 10-K, particularly the
section entitled "Risk Factors". These risks and uncertainties include but are
not limited to competition, the mix of products sold, the mix of distribution
channels employed, the Company's success in developing, introducing and shipping
new products, the Company's success in integrating acquired operations, the
Company's dependence on single or limited source suppliers for certain
components used in its products, price reductions for the Company's products,
risks inherent in international sales, changes in the levels of inventory held
by third-party resellers, the timing of orders from and shipments to customers,
seasonality and general economic conditions.

                                       17
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

Factors That May Affect Future Results (continued)

In particular, a substantial portion of the Company's sales of MAX and Pipeline
products is related to the Internet industry.  In North America, the Company
sells a substantial percentage of its products, particularly its MAX products,
to ISPs.  There can be no assurance that this industry and its infrastructure
will continue to develop or that acceptance of the Company's products by

this industry will be sustained.  The Company believes competition in the
Internet industry will increase significantly in the future and could adversely
affect the Company's business, results of operations and financial condition.

The Company has concluded the acquisition of four companies in 1996 and three
companies in 1997. Achieving the anticipated benefits of  these acquisitions or
any other acquisitions the Company may undertake will depend in part upon
whether the integration of the acquired companies' products and technologies,
research and development activities, and sales, marketing and administrative
organizations is accomplished in an efficient and effective manner, and there
can be no assurance that this will occur.  Moreover, the integration process may
temporarily divert management attention from the day-to-day business of the
Company.  Failure to successfully accomplish the integration of the acquired
companies could have a material adverse effect on the Company's business,
financial condition and/or results of operations.

The Company expects that its gross margins could be adversely affected in future
periods by price adjustments as a result of increased competition.  In addition,
increased sales of Pipeline products as a percentage of net sales may adversely
affect the Company's gross margins in future periods as these products have
lower gross margins than the Company's other products. In addition, the
Company's use of third parties to distribute its products to other value-added
resellers may adversely affect the Company's gross margins.

The Company expects that international sales will continue to account for a
significant portion of the Company's net sales in future periods.  International
sales are subject to certain inherent risks, including unexpected changes in
regulatory requirements and tariffs, difficulties in staffing and managing
foreign operations, longer payment cycles, problems in collecting accounts
receivable and potentially adverse tax consequences.  The Company depends on
third party resellers for a substantial portion of its international sales.
Certain of these third party resellers also act as resellers for competitors of
the Company that can devote greater effort and resources to marketing
competitive products.  The loss of certain of these third party resellers could
have a material adverse effect on the Company's business and results of
operations.  Although the Company's sales are denominated in U.S. dollars,
fluctuations in currency exchange rates could cause the Company's products to
become relatively more expensive to customers in a particular country, leading
to a reduction in sales and profitability in that country.  Furthermore, future
international activity may result in foreign currency denominated sales, and, in
such event, gains and losses on the conversion to U.S. dollars of accounts
receivable and accounts payable arising from international operations may
contribute to fluctuations in the Company's results of operations.  In addition,
sales in Europe and certain other parts of the world typically are adversely
affected in the third quarter of each calendar year as many customers reduce
their business activities during the summer months. These seasonal factors may
have an effect on the Company's business, results of operations and financial
condition.

                                       18
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

Factors That May Affect Future Results (continued)

The Company typically operates with a relatively small backlog. As a result,
quarterly sales and operating results generally depend on the volume of, timing
of and ability to fulfill orders received within the quarter, which are
difficult to forecast. In the Company's most recent quarter, the sequential
sales growth slowed from prior levels, and a disproportionate share of the sales
occurred in the last month of the quarter. These occurrences are extremely
difficult to predict and may happen in the future. The Company's ability to meet
financial expectations could be hampered if the nonlinear sales pattern
continues in future periods. Accordingly, the cancellation or delay of even a
small percentage of customer purchases could adversely affect the Company's
results of operations in the quarter. A significant portion of the Company's net
sales in prior periods has been derived from relatively large sales to a limited
number of customers, and therefore the failure of the Company to secure expected
large sales may have a material adverse impact on results of operations. A
significant portion of the Company's expense levels is relatively fixed in
advance based in large part on the Company's forecasts of future sales. If sales
are below expectations in any given quarter, the adverse impact of the shortfall
on the Company's operating results may be magnified by the Company's inability
to adjust spending to compensate for the shortfall. The Company may also
increase spending in the future in response to competition or to pursue new
market opportunities.

The market for the Company's products is characterized by rapidly changing
technologies, evolving industry standards, frequent new product introductions
and short product life cycles. The introduction of new products requires the
Company to manage the transition from older products in order to minimize
disruption in customer ordering patterns, avoid excessive levels of older
product inventories and ensure that adequate supplies of new products can be
delivered to meet customer demand.  Furthermore, products such as those offered
by the Company may contain undetected or unresolved hardware problems or
software errors when they are first introduced or as new versions are released.
There can be no assurance that, despite extensive testing by the Company,
hardware problems or software errors will not be found in new products after
commencement of commercial shipments, resulting in delay in or loss of market
acceptance.  Future delays in the introduction or shipment of new or enhanced
products, the inability of such products to gain market acceptance or problems
associated with new product transitions could adversely affect the Company's
business, results of operations and financial condition.

The Company mainly competes in four segments of the data networking market : (i)
wide area network ("WAN") and Internet access, (ii) WAN and Internet backbone
switching, (iii) remote LAN access and Internet subscriber access, and (iv)
videoconferencing and multimedia access. The Company competes in one or more of
these market segments with Cisco Systems, Inc., 3Com Corporation, Bay Networks,
Inc., Newbridge Networks, Inc., Shiva Corporation, Northern Telecom, Inc.,
Teleos Communications (a subsidiary of Madge Networks, Inc.), Adtran, Promptus
Communications (a subsidiary of GTI) and many others. Some of these competitors
have substantially greater financial, marketing and technical resources than the
Company. The Company expects additional competition from existing competitors
and from a number of other companies, some of which may have substantially
greater financial, marketing and technical resources than the Company, that may
enter the Company's existing and future markets. Increased competition could
result in price reductions, reduced profit margins and loss of market share,
each of which would adversely affect the Company's business, results of
operations and financial condition.

                                       19
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

Factors That May Affect Future Results (continued)

The Company's sales are, to a significant degree, made through
telecommunications carriers, value-added resellers ("VARs") and distributors.
Accordingly, the Company is dependent on the continued viability and financial
stability of these companies. While the Company has contractual relationships
with many telecommunications carriers, VARs and distributors, these agreements
do not require these companies to purchase the Company's products and can be
terminated by these companies at any time. There can be no assurance that any
of the telecommunications carriers, VARs or distributors will continue to
market the Company's products. The telecommunications carrier customers, to
the extent they are resellers, VARs and distributors, generally offer products
of several different companies, including products that are competitive with
the Company's products. Accordingly, there is a risk that these companies may
give higher priority to products of other suppliers, thus reducing their
efforts to sell the Company's products. Any special distribution arrangement
and product pricing arrangement that the Company may implement in one or more
distribution channels for strategic purposes could adversely affect gross
profit margins.

The Company's success depends to a significant degree upon the continuing
contributions of its key management, sales, marketing and product development
personnel.  The Company does not have employment contracts with its key
personnel and does not maintain any key person life insurance policies.  The
loss of key personnel could adversely affect the Company.

The Company is currently experiencing rapid growth and expansion, which has
placed, and will continue to place, a significant strain on its administrative,
operational  and financial resources and increased demands on its systems and
controls.  This growth has resulted in a continuing increase in the level of
responsibility for both existing and new management personnel.  The Company
anticipates that its continued growth will require it to recruit and hire a
substantial number of new engineering, sales, marketing and managerial
personnel.  There can be no assurance that the Company will be successful at
hiring or retaining these personnel.  The Company's ability to manage its growth
successfully will also require the Company to continue to expand and improve its
operational, management and financial systems and controls and to expand its
manufacturing capacity.  If the Company's management is unable to manage growth
effectively, the Company's business, results of operations and financial
condition may be materially and adversely affected.

                                       20
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

Factors That May Affect Future Results (continued)

Although the Company generally uses standard parts and components for its
products, certain components, including certain key microprocessors and
integrated circuits, are presently available only from a single source or from
limited sources. The Company has no supply commitments from its vendors and
generally purchases components on a purchase order basis as opposed to entering
into long term procurement agreements with vendors. The Company has generally
been able to obtain adequate supplies of components in a timely manner from
current vendors or, when necessary to meet production needs, from alternate
vendors. The Company believes that, in most cases, alternate vendors can be
identified if current vendors are unable to fulfill needs. However, delays or
failure to identify alternate vendors, if required, or a reduction or
interruption in supply, or a significant increase in the price of components
could adversely affect the Company's revenues and financial results and could
impact customer relations.

The Company's common stock has experienced significant price volatility, and
such volatility may occur in the future, particularly as a result of quarter-to-
quarter variations in the actual or anticipated financial results of the Company
or other companies in the networking industry, announcements by the Company or
competitors regarding new product introductions or other developments affecting
the Company and/or changes in financial estimates by public market analysts.  In
addition, the market has experienced extreme price and volume fluctuations that
have affected the market price of many technology companies' stocks and that
have been unrelated or disproportionate to the operating performance of these
companies.  These broad market fluctuations may adversely affect the market
price of the Company's common stock.  In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company.  Such
litigation could result in substantial costs and a diversion of management's
attention and resources, which would have a material adverse effect on the
operating results and financial condition of the Company.

In consideration of these factors, there can be no assurance that the Company
will be able to sustain growth in revenues or profitability, particularly on a
period-to-period basis.

                                       21
<PAGE>
 
Item 6:  Exhibits and Reports on Form 8-K:

     A:  Exhibits

      NO.                         DESCRIPTION
------------        ------------------------------------------------------------
/(6)/  3.1          Certificate of Incorporation.

/(1)/  3.2          By-Laws.

/(1)/ 10.1          First Amended and Restated 1989 Stock Option Plan and forms
                    of stock option agreements used thereunder.

/(1)/ 10.2          Ascend Communications, Inc. 1994 Employee Stock Purchase
                    Plan.

/(1)/ 10.3          Ascend Communications, Inc. 1994 Outside Directors Stock
                    Option Plan.

/(1)/ 10.4          Loan Agreement and related agreements, dated October 21,
                    1993, by and between the Registrant and First Interstate
                    Bank of California.

/(1)/ 10.5          Lease dated August 8, 1991, by and between the Registrant
                    and Harbor Bay Isle Associates, the First Addendum thereto,
                    dated August 8, 1991, and the Second Addendum thereto, dated
                    February 25, 1994.

/(1)/ 10.8          Form of Indemnity Agreement for directors and officers.

/(2)/ 10.9          Loan Agreement and related agreements, dated July 29, 1994,
                    by and between the Registrant and First Interstate Bank of
                    California.

/(3)/ 10.10         Lease Agreement, Lease Rider and Second Lease Rider, dated
                    May 17, 1995 by and between the Registrant and Resurgence
                    Properties, Inc.

/(4)/ 10.11         Loan Agreement and related agreements, dated November 30,
                    1995, by and between the Registrant and Wells Fargo Bank of
                    California.

/(5)/ 10.12         Lease agreement dated March 27, 1996, by and between the 
                    registrant and Sumitomo Bank Leasing and Financing, Inc.

/(7)/ 10.13         Ascend Communications, Inc. 1996 Restricted Stock Plan.

/(8)/ 10.14         Cascade Communications Corp. Amended and Restated 1991 
                    Stock Plan.

/(9)/ 10.15         Cascade Communications Corp. 1994 Employee Stock Purchase 
                    Plan.

/(9)/ 10.16         Cascade Communications Corp. 1994 Non-Employee Director
                    Stock Plan.

/(9)/ 10.17         Letter of Employment dated March 12, 1992 between the 
                    Registrant and Daniel E. Smith.

/(9)(10)(11)/ 10.18 Lease dated July 27, 1993 between Glenborough Corporation
                    and the Registrant; as amended by the first amendment
                    thereto dated February 24, 1994; as amended by the second
                    amendment thereto date July 24, 1994; as amended by the
                    third amendment thereto dated November 10, 1994; as amended
                    by the fourth amendment thereto dated December 1, 1995.

/(12)/        10.19 Lease dated November 14, 1996 between the Registrant and 
                    Nashoba View Associated, LLC.

 
                                         22
<PAGE>
 
    (A)   Exhibits (continued)

      NO.                         DESCRIPTION
------------       ------------------------------------------------------------
      11.1         Statement regarding computation of earnings per share 
                   included in notes to condensed consolidation financial
                   statements page 8.

      27.0         Financial Data Schedule.


/(1)/  Incorporated by reference from the Company's Registration Statement 
       (No.33-77146), effective May 12, 1994.

/(2)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended September 30, 1994.

/(3)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended June 30, 1995.

/(4)/  Incorporated by reference from the Company's Form 10-K for the year ended
       December 31, 1995.

/(5)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended March 31, 1996.

/(6)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended June 30, 1996.

/(7)/  Incorporated by reference from the Company's Form 10-K for the year ended
       December 31, 1996.

/(8)/  Incorporated by references from Cascade Communications Corp.'s
       Registration Statement on Form S-8 (File NO. 33-93152) filed with the
       Securities Commission and Exchange Commission (the "Commission") on June
       6, 1995.

/(9)/  Incorporated by reference from Cascade Communications Corp.'s
       Registration Statement on Form S-1 (File No. 33-79330) filed with the
       Commission on May 26, 1994, as amended, which Registration Statement
       became effective on July 28, 1994.

/(10/  Incorporated by reference to the corresponding exhibit previously filed 
       as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the
       fiscal year ended December 31, 1994 on March 29, 1995.

/(11)/ Incorporated by reference to the corresponding exhibit previously filed 
       as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the
       fiscal year ended December 31, 1995 on March 1, 1996.

/(12)/ Incorporated by reference to the corresponding exhibit previously filed 
       as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the
       fiscal year ended December 31, 1996 on March 14, 1997.


Reports on Form 8K:

The Company filed a report on Form 8-K on July 11, 1997 announcing the
completion of the merger with Cascade. On July 30, 1997, the Company filed on
Form 8-K/A an amendment to the Form 8-K previously filed on July 11, 1997 to
include, as exhibits, historical financial statements of Cascade and Pro Form
Financial Information.

In connection with the merger with Cascade, the Company filed a Report on Form 
8-K on August 11, 1997 announcing consolidated net sales and net income for the
month ended July 31, 1997.

 

                                       23
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.


                                  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.



                                ASCEND COMMUNICATIONS, INC.



Date  November 14, 1997         by  /s/ Michael F.G. Ashby
    -----------------------        ---------------------------------------
                                   Michael F.G. Ashby, Vice President, Finance
                                   and Chief Financial Officer       
                                   (Principal Financial Officer)



Date  November 14, 1997         by  /s/ Michael J. Johnson
    -----------------------        ---------------------------------------
                                   Michael J. Johnson, Controller and
                                   Chief Accounting Officer                     
                                   (Principal Accounting Officer)

                                       24
<PAGE>
 
                          ASCEND COMMUNICATIONS, INC.

                               INDEX TO EXHIBITS



      NO.                         DESCRIPTION
------------        ------------------------------------------------------------
/(6)/  3.1          Certificate of Incorporation.

/(1)/  3.2          By-Laws.

/(1)/ 10.1          First Amended and Restated 1989 Stock Option Plan and forms
                    of stock option agreements used thereunder.

/(1)/ 10.2          Ascend Communications, Inc. 1994 Employee Stock Purchase
                    Plan.

/(1)/ 10.3          Ascend Communications, Inc. 1994 Outside Directors Stock
                    Option Plan.

/(1)/ 10.4          Loan Agreement and related agreements, dated October 21,
                    1993, by and between the Registrant and First Interstate
                    Bank of California.

/(1)/ 10.5          Lease dated August 8, 1991, by and between the Registrant
                    and Harbor Bay Isle Associates, the First Addendum thereto,
                    dated August 8, 1991, and the Second Addendum thereto, dated
                    February 25, 1994.

/(1)/ 10.8          Form of Indemnity Agreement for directors and officers.

/(2)/ 10.9          Loan Agreement and related agreements, dated July 29, 1994,
                    by and between the Registrant and First Interstate Bank of
                    California.

/(3)/ 10.10         Lease Agreement, Lease Rider and Second Lease Rider, dated
                    May 17, 1995 by and between the Registrant and Resurgence
                    Properties, Inc.

/(4)/ 10.11         Loan Agreement and related agreements, dated November 30,
                    1995, by and between the Registrant and Wells Fargo Bank of
                    California.

/(5)/ 10.12         Lease agreement dated March 27, 1996, by and between the 
                    registrant and Sumitomo Bank Leasing and Financing, Inc.

/(7)/ 10.13         Ascend Communications, Inc. 1996 Restricted Stock Plan.

/(8)/ 10.14         Cascade Communications Corp. Amended and Restated 1991 
                    Stock Plan.

/(9)/ 10.15         Cascade Communications Corp. 1994 Employee Stock Purchase 
                    Plan.

/(9)/ 10.16         Cascade Communications Corp. 1994 Non-Employee Director
                    Stock Plan.

/(9)/ 10.17         Letter of Employment dated March 12, 1992 between the 
                    Registrant and Daniel E. Smith.

/(9)(10)(11)/ 10.18 Lease dated July 27, 1993 between Glenborough Corporation
                    and the Registrant; as amended by the first amendment
                    thereto dated February 24, 1994; as amended by the second
                    amendment thereto dated July 24, 1994; as amended by the
                    third amendment thereto dated November 10, 1994; as amended
                    by the fourth amendment thereto dated December 1, 1995.

/(12)/        10.19 Lease dated November 14, 1996 between the Registrant and
                    Nashoba View Associated, LLC.

/(1)/  Incorporated by reference from the Company's Registration Statement 
       (No.33-77146), effective May 12, 1994.

/(2)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended September 30, 1994.

/(3)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended June 30, 1995.

/(4)/  Incorporated by reference from the Company's Form 10-K for the year ended
       December 31, 1995.

/(5)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended March 31, 1996.

/(6)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended June 30, 1996.

/(7)/  Incorporated by reference from the Company's Form 10-K for the year ended
       December 31, 1996.

/(8)/  Incorporated by references from Cascade Communications Corp.'s
       Registration Statement on Form S-8 (File NO. 33-93152) filed with the
       Securities Commission and Exchange Commission (the "Commission") on June
       6, 1995.

/(9)/  Incorporated by reference from Cascade Communications Corp.'s
       Registration Statement on Form S-1 (File No. 33-79330) filed with the
       Commission on May 26, 1994, as amended, which Registration Statement
       became effective on July 28, 1994.

/(10/  Incorporated by reference to the corresponding exhibit previously filed 
       as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the
       fiscal year ended December 31, 1994 on March 29, 1995.

/(11)/ Incorporated by reference to the corresponding exhibit previously filed 
       as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the
       fiscal year ended December 31, 1995 on March 1, 1996.

/(12)/ Incorporated by reference to the corresponding exhibit previously filed 
       as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the
       fiscal year ended December 31, 1996 on March 14, 1997.

Reports on Form 8K:

The Company filed a report on Form 8-K on July 11, 1997 announcing the
completion of the merger with Cascade. On July 30, 1997, the Company filed on
Form 8-K/A an amendment to the Form 8-K previously filed on July 11, 1997 to
include, as exhibits, historical financial statements of Cascade and Pro Form
Financial Information.

In connection with the merger with Cascade, the Company filed a Report on Form 
8-K on August 11, 1997 announcing consolidated net sales and net income for the
month ended July 31, 1997.





                                       25
<PAGE>
 
Index to Exhibits (continued)


      NO.                         DESCRIPTION
------------       ------------------------------------------------------------
      11.1         Statement regarding computation of earnings per share 
                   included in notes to condensed consolidation financial
                   statements page 8.

      27.0         Financial Data Schedule.


/(1)/  Incorporated by reference from the Company's Registration Statement 
       (No.33-77146), effective May 12, 1994.

/(2)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended September 30, 1994.

/(3)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended June 30, 1995.

/(4)/  Incorporated by reference from the Company's Form 10-K for the year ended
       December 31, 1995.

/(5)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended March 31, 1996.

/(6)/  Incorporated by reference from the Company's Form 10-Q for the quarter 
       ended June 30, 1996.

/(7)/  Incorporated by reference from the Company's Form 10-K for the year ended
       December 31, 1996.



                                       26