The Gunners were ahead 2-0 thanks to a double from Pierre-Emerick Aubameyang.
Roberto Pererya sealed the comeback after he was fouled by David Luiz inside the box.
"We are very disappointed, we had a good first half and then we came out and played so bad in the second half," he said to BBC Sport. "We paid for that.
"We knew they had nothing to lose and they would come for us but we didn't show our game, we were too scared, nobody wanted the ball."
"They won the second half and my summary is it is not a good point.
"We need to continue working. When we tried to play the long ball we lost the ball as well.
"They pushed us. Watford last year played like today.
"We were up in the first half and we knew that we needed to score the third. They had the capacity to come back with the supporters and that's what happened.
"We couldn't break their pressing in the second half. They are physical, a very strong team. They pushed for our mistakes, they were playing for our mistakes."