It's hard to understand what is going on with them and not it will become interesting. They extended Guardiola's contract and it would be ridiculous if they sack him weeks later, so I suppose they are going on with him no matter what's going to happen.
Sacking him after extending his contract weeks ago will really be ridiculous and will be the loss of the club because finding a good coach nowadays is not easy, we have seen how Chelsea and Manchester United were struggling to have a decent coach so sticking with him the best option for them.
Manchester City would find a new coach in no time since they have the money and the status in the world of football. But yes it would be a bad sign if they sack him after extending his contract, however it is possible that in talks with his bosses he himself will draw the conclusion that getting him fired is the best thing to do or that he will throw the towel.
It is often said that Guardiola should be fine because he was so successful in the past, but look at Klopp what he did two times. When he noticed that the energy level, the intensity of the connection between him and the team is exhausted or is going down quickly, he calls it a day and communicated openly and transparently that the time may have come some changes.
I don't think it is a bad thing to deal with these things in an honest way, but my understanding is that they extended the contract because they thought it would help remedy the bad situation. But now that it was getting worse and worse, I think this could become a quandary for everyone. For Guardiola, but for players like De Bruyne because he isn't happy as he is on his way losing Guardiola's trust and then also for the bosses.
I don't Manchester City will be willing to find another coach despite Pep Guardiola recent struggles in both the Premier league and the Champions League. Pep Guardiola still remains City’s greatest manager and as such he is highly respected at the club and that's why they decided to extend his contract. Despite their recent struggles, the club hierarchy will be confident that Guardiola will be able to get Manchester City back to their best.