Ole Gunnar Solskjaer claimed the performance in the 2-0 defeat at Wolves was the worst of his tenure after Manchester United crashed out of the FA Cup.
United were never at the races and the defeat means United have suffered back-to-back defeats for the first time under the Norwegian.
When Raul Jimenez swivelled to fire home on 70 minutes, United wilted rather than rallied under the Molineux floodlights and soon fell further behind.
Jota turned Luke Shaw inside out and left the defender on the deck and the Wolves man raced through to fire home to the delight of the home fans.
Marcus Rashford pulled a goal back for the visitors deep into stoppage time, but there was no time to find an equaliser as Wolves secured a place in the semi-finals with a 2-1 win.
Solskajer told BBC Sport: “We played into their hands really. We were not bright enough, not sharp enough.
“We started too slowly and played into their hands. Our possession wasn’t bright enough and quick enough, so it’s disappointing.
“I didn’t think we had enough quality in the last third, enough combination play. We had decent dominance with the ball in the first half but that doesn’t help if you give the ball away and they can counter.
“This was a big step backwards, mainly because of the quality of the possession and the passing.
“Arsenal was good, we just couldn’t score. Today was poor, the poorest we’ve played to be honest.
“I’m here until the summer, we’ve got loads to play for in the league and the Champions League.”
On Diogo Dalot’s shot which hit the arm of a Wolves defender, he said: “From one angle it looks a nailed on penalty, from the other not so sure.”
Wolves manager Nuno Espirito Santo, told BBC Sport: “I’m very proud of the players. We had composure, shape, good running. Very well done to the boys and it was a fantastic atmosphere.
“It means a lot because we know how big Wolves were in the 1950s and 1960s and there are people in the stadium who have memories of that. To try to achieve the same is much, much harder now but we will try step by step. We will respect everybody in the semi-finals.”