Brendan Rodgers admitted his Celtic side lacked quality in their shock 1-0 Viaplay Cup defeat to Kilmarnock at Rugby Park.
Marley Watkins converted a Danny Armstrong pass in the 59th minute of a pulsating last-16 tie to send Derek McInnes' side into the quarter-finals where they will host Hearts.
It was a first defeat for Rodgers in cup competitions in Scotland in 25 games and put the holders out.
The Celtic boss said: "We are very disappointed and it was certainly nowhere near the level that we need to be at to win the game.
"Kilmarnock showed their resilience and took their chance when it came.
"We were a bit more progressive when Kilmarnock got the goal and we started to be a threat.
"I thought Yang (Hyun-jun) coming into the game looked very well and he gave us that ability to take people on in a one-v-one but other than that we lacked quality in the game and it's so disappointing.
"We were just not at the level in terms of performance.
"It is a tough place to come, of course, but we need to show more and we need to have a greater physicality in the game and then when you have won that battle you need to play with more quality and we didn't play with that."
Rodgers won seven out of seven trophies in his first spell as Celtic boss and insisted the defeat put that achievement into context.
He said: "I think when I came in here before and won trebles people think that's just what you come in and do.
"It's a very difficult thing to do and you see with this defeat that magnifies the achievement from before.
"It is a new cycle and I want to win every game as the Celtic manager and this is bitterly disappointing."
Killie completed a remarkable early-season Old Firm double, having beaten Rangers 1-0 on the opening day of the cinch Premiership before a goalless draw against Hearts at Tynecastle.
Dennis, Lyons, Deas, Mayo, Ndaba, Armstrong (McKenzie 81), Watson, Magennis (Donnelly 81), Findlay, Kennedy, Watkins (Vassell 74).
Hart, Ralston, Nawrocki, Lagerbielke, Taylor, O'Riley (Haksabanovic 75), McGregor, Holm (Turnbull 64), Abada (Yang 65), Furuhashi, Maeda.
Alan Muir (Scotland).