Having won each of the previous three major international tournaments, Spain came into the finals in Brazil among the favourites, looking to defend the trophy they lifted in South Africa four years ago.
However, a 5-1 thumping by Netherlands and a 2-0 defeat to Chile saw Vicente del Bosque's men have their elimination confirmed even before their final Group B fixture, against Australia on Monday.
The nation's exit led some to suggest that the team's time as a dominant force in world football is over, but Simeone, who led Atletico Madrid to La Liga title glory in 2013-14, believes Spain will come back stronger.
"The reality is that if others prepare to win and compete to win, sometimes they do better than you," he told Sony One Stadium.
"And that's what happened to Spain. That's football.
"This time they lost, but I'm sure Spain will be back competing again - just like they have done for the last 10 years.
"Spain made us fall in love with the football we saw at Barcelona. It was an incredible moment which brought together a wonderful group of individuals - and the results were there for all to see.
"Today, that moment is not the same as before and all the rest are always looking to try to beat them, to beat Barcelona and to beat Spain - so it's logical some have found the formula for competing against them."
Diego Costa, prolific in Atletico's title-winning season, made his tournament bow for his naturalised country, but failed to make much of an impact in the Spanish system of patient possession.
And Simeone, who knows the striker better than anyone, conceded that the Brazil-born 25-year-old did not quite fit into the team's style of play.
"With the result as it is, it would also be very easy to say that Diego Costa didn't work out," he said.
"Spain were used to playing at one rhythm and one pace, while Costa offers other characteristics. If you don't take advantage of Costa's runs, you isolate him.
"He likes to exploit the spaces, to attack from deep positions and to get on the end of final passes, but Spain's football focuses more on the collective.
"Playing that collective game, Spain haven't performed at their best, nor were they able to take advantage of Costa and the characteristics he brings."
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