Pierre-Emerick Aubameyang proved the difference on a frustrating evening for City, with the Gabonese striker’s double earning the Gunners a 2-0 win at Wembley.
And Gundogan highlighted our first half performance in particular as an area where we need to improve.
“I think the energy we had starting the second half was exactly what we needed at the beginning of the game,” the German reflected.
“Sometimes one very bad half is enough to lose the game and it looked like Arsenal wanted it more to go to the Final today which was the most frustrating part.
“We had two kind of good chances in the beginning when we won the ball in front of the Arsenal goal but after that our game was sloppy and slow and there was a lack of energy.”
Irrespective of our slow start to the game, Pep Guardiola’s men were quick out of the blocks in the second half and we could have found ourselves level before Aubameyang doubled the lead with 20 minutes to go.
In particular, Kevin De Bruyne was inches away from guiding a sumptuous free-kick into Emiliano Martinez’s net just after the hour mark before Raheem Sterling could not quite adjust his body in time to guide home a close-range header from a corner minutes later.
And Gundogan admitted that City’s performance after the break was much better, despite the disappointment of not turning the game around.
“At half-time, first of all the manager but also we to each other said this is not enough and we needed more energy and more rhythm in our game to create chances," the German international admitted.
“The energy was good (in the second half), we still struggled to create clear chances even though we had good shots but obviously the second goal killed the game.”
Although the FA Cup will not be coming back to the Etihad for a second consecutive season, City are still in the hunt for Champions League glory when we take on Real Madrid in our last 16 second leg tie in August.
But Gundogan warned the team need to avoid a similar performance if we want to turn that ambition into a reality.
“We have two more league games to play and then we have a big game against Madrid," he said.
"We should definitely improve because the way we played today won’t be enough to go into the next round of the Champions League.
“We have to improve quite quickly because we don’t have much time… We need to try to do our best."