The Gunners' 2-1 defeat was the first time they had lost in the competition in 37 months but Wenger thinks his side were good enough to beat Watford.
Second half goals from Odion Ighalo and Adlene Guedioura put the Hornets in charge and a late Danny Welbeck consolation could not save Arsenal
Wenger said: "We defended well, took our chances on the break
They were physically very strong and overall I think we had enough chances to win the game
It was difficult to understand why we didn't score, I want to watch it again
"It is a typical cup game where a team comes and fights and takes their chances with us trying to score.
"Our long, long run in the FA Cup comes to an end and it is in a very sad way because I did not think we deserved to lose this game.
"We have to look at ourselves maybe on the first goal
The second goal was a fantastic shot and I felt it was a real cup game
"We do not make enough of our possession in the final third
Watford is a team who is good on the break and they depend on Ighalo and Deeney
The defence kept with them and overall we did not give many chances away."
Arsenal defender Gabriel could have been sent off by referee Andre Marriner in the first half for a tackle on Watford captain Troy Deeney but the man in charge chose not to react and the Arsenal boss believes he made the right decision.
Wenger said: "It did not look to me that (Gabriel should have been sent off)
He won the ball, it looked to me Deeney as well (had both feet off the ground)
Both players went for the ball, Gabriel got there first, that is how it looked
"Maybe if both feet were off the ground, I will have to look at it again."
Watford had only 29% of the possession at the Emirates and boss Quique Sanchez Flores agreed with Wenger about the Gabriel's challenge on his captain.
He said: "No, for me it is football, it is England
This is the kind of contact we see each week, it is nothing special."
The Hornets will find out who they face in the semi-final at Wembley when the draw is made on Monday night but Flores believes Watford have had a season to remember both in the competition and in the Barclays Premier League
He said: "I think this is the most important moment of my career.
"We try to enjoy this moment, this journey, this team, we now get to play in the semi-final at Wembley.
"This season is an amazing season for Watford, the players play for the fans.
"For a long time we played well, trying to create attempts.
"For 80 minutes we were, not comfortable because we were playing Arsenal but we are in the plan
The last minutes were difficult but we mixed it well."
Source : PA
Source: PA