Seeking to reach the FA Cup final for the second successive year, holders City were instead undone at Wembley by goals in either half from Arsenal striker Pierre-Emerick Aubameyang.
It was a hugely disappointing way to exit the competition but there is still much to play for this season with City holding a 2-1 advantage over newly-crowned Spanish champions Real ahead of next month’s Etihad crunch clash.
And, Guardiola insisted his players would regroup and come back hungrier than ever in the wake of tonight’s loss to Arsenal.
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“We know the standards we need at this stage of competitions. I don’t have to tell them,” declared the City manager.
“They have to know it. They feel it, I think
“Maybe we are learning, maybe now, we will see.
“The first half was not good, and we struggled to play at our level. It doesn’t take a genius to know we have to increase the standard for Madrid.”
It was City’s first defeat in a domestic Cup competition for more than two and half years and a subdued display was a frustrating way for such a remarkable run to come to an end.
And as he reflected on the loss, Guardiola was left to bemoan an off-key first half performance in particular.
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“Sometimes it happens. It’s an incredible run but in football you can lose. But the way we lost is what we are sad about,” the City boss continued.
“We didn’t make a good performance; we were not ready enough.
“If you don’t play for 90 minutes in a semi-final this can happen.
“We didn’t play good, we are human beings. The opponent played good, sometimes it happens.
“The only regret is that we didn’t play the first half like we played the second one. We had to change the set-up but we couldn’t do it.
“But the situation is in the first half we struggled to play. That’s why we lost the game.
“If you play the first half the way we did in second, maybe it would have been different. But we couldn’t do it.”