Neville previously maintained that he felt Man City would catch Arsenal to win the Premier League.
But after their 1-0 defeat at Tottenham last weekend, he changed his mind.
Speaking on Sky Sports after the game, the pundit said on The Overlap: “I think they [Arsenal] played quite well [against Everton], I didn’t think it was a bad one – obviously it’s a bad result for them.
“Do you know something, we were at the City game on Sunday and when the team came through I thought for the first time that Arsenal could win the league.
“And that’s not looking smart after the event because City had lost, but I just thought he [Guardiola] is messing around, he’s tinkering far too much.
“I don’t know why Kevin De Bruyne I sn’t playing, I don’t know why IIkay Gundogan is not playing, I don’t know why Ruben Dias is not back in the centre of that defence with Aymeric Laporte to make them solid.
“I saw the team and I thought, from the point of view of my prediction – which is that City will catch Arsenal – I was less sure on Sunday than I’ve ever been.
“I was pretty certain two weeks ago, I was actually certain on Saturday afternoon, I thought, ‘Right, City will do it proper tomorrow, this will be a proper champion’s performance, he [Pep] won’t mess around’, but if he carries on doing what he’s doing…”