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Well there performance this season is not really bad and even though they've lost a game, they're still the league leaders and would continue dominating for a while and if you noticed they're even doing fine in the champions league cause they're leading their in their group with about 6points, i have this believe that City would beat Arsenal in their next match, though it's not going to be easy based on Arsenal's current performance.
It came as a surprise to me too, if Manchester City where to even lose any game it should be that of Arsenal's but losing against Wolverhampton wasn't really expected and it even made many bettors lose their games lol, well the fact that they lost one game doesn’t write them off cause they're still very strong league contenders and might win the league again.
Even though Manchester City has been the defending champion of the Premier League for the last 3 seasons, on average they have lost 4.6 times in the last 3 seasons. This means that Manchester City can still be beaten by anyone, but as long as they are able to play better and prevent City players from scoring goals. But with their average defeat clearly visible in the last 3 seasons, there are only a few teams that can beat City.
Wolves are the first team to beat Manchester City this season, but I'm sure there are other teams who can do it including Arsenal, Liverpool or others. The probability of Manchester City winning in each match is always high, but that does not always guarantee that your bet will win. Manchester City is the strongest team in the Premier League this season, but they have the possibility of being beaten.