Al Hilal's surprised every one because ppl didn't expect Manchester City to lose. Their win against a premier league team shows SPL teams are strong they aren't going to give up they'll play trying to win. Al Hilal won't win the cup but they've made SPL teams proud of them.
They really surprised us all by pulling off such strong performance and even end up winning against Manchester City, no one believes it could happen even though some will say Manchester City are not at their best performance. I know this is what Saudi leaders wants, they want their league to be regarded as one of the best leagues that can also compete with European teams. They funded their football and it really helped them to develop in just a few years and now they are not far away from these European teams. They don't look like the favorites to win the title but they will definitely fight till the very end.
Man City isn't in their stable performance since the last season, some people probably aren't so surprised to see their lose. However, it is amazing that Al Hilal can beat Man City, it indicates a team from Saudi league quite strong to face the European teams. Even a big team from EPL, can be defeated by Al Hilal, it is a good sign of the Saudi league quality level.
You're right winning Manchester City and having a good display against Real Madrid really shows how good they have become. Manchester City might not be at their best but it's not an excuse at all.