Top-seeded Roger Federer made an early exit from the Madrid Open on Wednesday after a narrow, second-round loss to Nick Kyrgios.

The 20-year-old Australian ended Federer's hopes of a fourth title at the Spanish tournament by rallying for a 6-7 (2), 7-6 (5), 7-6 (12) victory.

Kyrgios is in form, having reached the final at the Estoril Open before losing to Richard Gasquet. The 2014 Wimbledon quarterfinalist also relinquished his status as the ATP's highest-ranked teenager by turning 20 last week.

Kyrgios ended Federer's hopes of a fourth title at the Spanish tournament by rallying for a 6-7 (2), 7-6 (5), 7-6 (12) victory. 

Federer said his problem was that "I couldn't return his first serve," adding: "Just a horrible performance on the return."

Kyrgios said he had been excited at the prospect of playing his childhood hero.

"Last night it was a bit tough to get some sleep," he said. "I've been playing well recently on the clay, so I knew I had a good chance to go out there and do well. I stuck to my game and served well and I got the win."

In a late match, second-seeded Andy Murray beat Philipp Kohlschreiber of Germany 6-4, 3-6, 6-0 - his second win over the German player in three days. He beat Kohlschreiber at the Munich Open on Monday to capture his first clay court title.

On the women's side, Victoria Azarenka squandered triple match point in a dramatic last service game and Serena Williams survived to reach the quarter-finals with a 7-6 (5), 3-6, 7-6 (1) victory.

Trying to serve out the match at 6-5 in the deciding set, Azarenka double-faulted on the final three points to gift Williams the game.

Williams then dominated the tiebreaker and improved her head-to-head record against Azarenka to 15-3. Azarenka is 0-9 against top-ranked players.

"She almost hit an ace. She missed it by not even three centimeters. I thought, 'Wow,'" Williams said of her rival's serve at 40-0. "This is definitely an escape. I've had some other escapes, but I don't think I've been down love-40 on someone's serve before."

After an injury-affected 2014, Azarenka, a two-time finalist, was unseeded in Madrid for the first time.

"She's absolutely on her way back," Williams said. "It's so good to see a Grand Slam champion like her playing so well."

Defending champion Maria Sharapova advanced to the quarter-finals by beating Caroline Garcia of France 6-2, 4-6, 7-5.

The No. 3-seeded Sharapova, making her sixth appearance at the Madrid tournament, broke Garcia's serve five times but was broken three times.

"She was going for it. I could have had a higher percentage of first serves in, but even on good second serves she stepped in and hit really good shots," Sharapova said. "There was not much I could do until she started making a few errors."

Also advancing were No. 4 Petra Kvitova, who beat Anastasia Pavlyuchenkova 6-1, 6-4, and No. 5 Caroline Wozniacki, who beat Agnieszka Radwanska 6-3, 6-2.

Carla Suarez Navarro upset seventh-seeded Ana Ivanovic 7-5, 1-6, 6-4 and Romania's Irina-Camelia Begu beat Barbora Strycova 6-4, 6-4.

Lucie Safarova of the Czech Republic beat Roberta Vinci of Italy 6-4, 6-7 (6), 6-0.

Clay court king Rafael Nadal broke Steve Johnson's serve three times in a 6-4, 6-3 win and is aiming to extend his streak of winning at least one European ATP World Tour clay court title in the run-up to Roland Garros to 11 consecutive years.

In other men's results, sixth-seeded Tomas Berdych beat Richard Gasquet 7-6 (3), 7-5 and No. 7 David Ferrer had a 6-4, 6-0 win over fellow Spaniard Albert Ramos-Vinolas.

The 10th-seeded Grigor Dimitrov rallied for a 3-6, 6-2, 7-5 victory over Fabio Fognini, John Isner beat Thomaz Bellucci 7-6 (5), 6-7 (11), 6-1, Simone Bolelli had a 4-6, 6-3, 6-2 win over Luca Vanni in an all-Italian matchup, and Jo-Wilfried Tsonga ousted Jack Sock 6-3, 1-6, 7-6 (4).