The Gunners had struggled with creativity in their games before the match against Chelsea.
But they brought in Smith Rowe into their starting XI for that game, and the Englishman helped them earn a 3-1 win.
They have gone on to win two more matches with him in their starting XI.
Isco was eyed by the Gunners as the player that would bring creativity to their team for the second half of the season.
The Spaniard is struggling to play in Madrid, and he wants to be at the Euros this year.
He would have represented an experienced addition to the Arsenal midfield, but the report says that the Gunners have been delighted by the impact of Smith Rowe, and they are prepared to hand him more chances.
It also adds that the Arsenal man’s height gives him an advantage over Isco and praised the Englishman for having a magical right foot.
Isco is now closer to joining his former manager, Julen Lopetegui at Sevilla when he leaves Madrid than he is Arsenal.