The result leaves Real seven points behind the La Liga leaders.
Xabi, who started the match on the bench as he was struggling with illness, said: "With this defeat the distance to Barcelona has grown, but there's a long way to go and we need to continue fighting until the end.
"We know that it won't be easy, but we need to look ahead and continue with the good work we have been doing. We cannot give up.
"We need to look ahead and think first about the cup game against Sevilla and then the next league game (at home to Real Sociedad)."