A runner-up at the WTA Finals last year, Pegula lost her opening two matches in Saudi Arabia in straight sets and had no chance of advancing to the semi-finals.
The US Open finalist was due to face defending champion Iga Swiatek in the last day of round-robin action on Thursday and will now be replaced by Daria Kasatkina on the schedule.
Kasatkina is ranked number nine in the world and recently clinched the WTA 500 title in Ningbo.
She is 1-5 head-to-head against Swiatek, losing her last five consecutive clashes with the Pole.
Coco Gauff is the only player in the Orange Group in Riyadh to have secured passage to the semi-finals.