1 has now failed to reach the quarter-finals in any of his last three Masters series events, as well as suffering a shock fourth round exit at the Australian Open to Mischa Zverev in January.
World number one Andy Murray lost 6-3 6-3 to unseeded Borna Coric in the Madrid Open third round on Thursday as his hard start to the claycourt season continued, while Rafa Nadal and Novak Djokovic eased into the quarter-finals.
Coric also won his first ATP title, on clay, this year, beating the likes of Albert Ramos-Vinolas, Diego Schwartzman and Philipp Kohlschreiber en route to success in Marrakech.
In between crashing out of the Monte Carlo Masters to Albert Ramos-Vinolas last month and arriving in Madrid, Murray had shown some signs of finding his form by reaching the semi-finals at the Barcelona Open.
World No. 2 Novak Djokovic also made it to the quarter-finals of the Madrid Open with a straight sets victory over Spaniard Feliciano Lopez.
Coric will meet Austria's Dominic Thiem, conqueror of Grigor Dimitrov, in the last eight.
"It's not always the worst thing losing a match, but it's sometimes the manner of how you lose the match is what can be concerning or disappointing". "In the end I played as I had dreamed", said Coric.
The 14-time Grand Slam champion had a slice of fortune as a let cord and a Kyrgios double fault handed him the two breaks he needed to take the first set. If a gameplan isn't working it's not my coach's fault because I always go over the gameplan.
It's not the first time Murray has come unstuck against Coric as a lucky loser, with his defeat to the Croat in Dubai coming in the same circumstances.
Murray was then put under even more pressure at the start of the second set but held firm to stop Coric taking advantage of a break point.
Murray has struggled to maintain the consistency that saw him dethrone Novak Djokovic at the top of the rankings at the back end of last year and a 6-3 6-3 defeat to the 20-year-old Croatian provided his latest setback.
Nadal meets David Goffin in the quarter-finals on Friday after the Belgian beat Milos Raonic 6-4 6-2, while Djokovic will play Japanese sixth seed Kei Nishikori, who saw off David Ferrer of Spain 6-4 6-3.