Mikel Arteta's side ran riot in the Portuguese capital to put their hosts to the sword, just three weeks after Sporting had done the same to Premier League champions Manchester City in a 4-1 Champions League triumph of their own.
Indeed, Sporting went into the contest with 17 wins and one draw from 18 games in all competitions this season, including a perfect 10 wins from 10 at home, where they had not been beaten in any competition since October 2023.
Arsenal had five different scorers on the night, with Gabriel Martinelli, Kai Havertz, Gabriel Magalhaes, Bukayo Saka and Leandro Trossard all getting on the scoresheet, and Watts believes that the nature of the result will make the rest of Europe sit up and take notice.
When asked whether the performance surpassed Saturday's 3-0 triumph over Nottingham Forest as their best of the season, Watts told Sports Mole: "I think so. You can't really give any other answer to that.
"It was sensational stuff from Arsenal in Lisbon. As a statement heard around Europe, I imagine that result, everyone will be looking at that and thinking, 'what on earth has happened there?'"
Arsenal "were just so good"
Sporting's impeccable home form this season, including that eye-catching triumph over Man City, was not the only reason for Arsenal fans to be concerned heading into Tuesday's contest.
The Gunners' only win in their previous seven away games came at Championship side Preston North End, and not since August had they beaten a top-flight team outside of North London.
The picture was even grimmer in the Champions League, with Arsenal having only won once away from home in the competition since 2016, including taking a five-game winless streak and four-game goalless run to the Estadio Jose Alvalade.
However, they scored five times in a Champions League away game for only the third time in their history, registering as many goals in 90 minutes as they had in their previous eight Champions League away matches combined.
"Sporting have been so, so good at home - unbeaten in the last year, 13 months since they last lost at home, we've seen them tear Manchester City to shreds just a few weeks ago - so Arsenal went there expecting a really, really difficult game," Watts told Sports Mole.
"I think all the Arsenal fans were looking at it and worrying about Viktor Gyokeres and everything like that, but in the end, it was a stroll in the park for Arsenal. They were just so good. There was an intensity about them from the first whistle that you could see they just wanted to lay a bit of a marker down.
"It's been a difficult time for Arsenal away from home in Europe in recent games - four games without a goal, I was over in Milan watching the Milan game when they played pretty well, dominated large chunks of the game and never really looked like scoring. That threat just wasn't there.
"But last night, it was the complete opposite. Every time they went forward, they looked like they were going to score. Sporting just couldn't cope with them - the intensity, the press, the speed of movement, it was just all there for Arsenal. It all came together - sensational result."
Arsenal showed "all the hallmarks" of last season's form
Arsenal suffered a four-game winless run in the Premier League prior to the most recent international break - their worst spell of form in the division since December 2020, and one which saw them slip nine points behind leaders Liverpool.
However, since domestic football returned they have picked up two impressive wins in succession, comfortably seeing off a Nottingham Forest side that was previously unbeaten away from home in the league this season, and then blitzing a previously-perfect Sporting in their own backyard.
The gap to Liverpool in the Premier League table remains nine points, but with some key players now back from injury and Arteta able to name something close to his strongest XI, Watts believes that the Gunners are beginning to show the sort of form that saw them win 16 of their final 18 Premier League games last season as they narrowly missed out on the title to an even-more-relentless Man City side.
"There's all the hallmarks of last season's Arsenal in the last couple of games that we've seen. The way they've gone forward, the goals they've scored, sharing the goals around - which is such a strong point of this Arsenal squad and has been for the last couple of seasons - there's just a fluidity about them that hasn't been there," he told Sports Mole.
"A large chunk of it is down to the fact that they've actually got players back now available for the first time this season. There's just a balance to the side that has been lacking. The left hand side has actually got left-sided players playing on it. The right side is looking really, really strong.
"[Martin] Odegaard's back. You've got that relationship with Saka again, which we saw again last night. Jurrien Timber played his part massively again, just as he did at the weekend. Sensational, I thought, Jurrien Timber yesterday.
"They just looked like the Arsenal team that in the second half of the season was scoring six at West Ham, five at Burnley, six at Sheffield United. They were putting teams to the sword. It's only been a couple of games, so you can't get too far ahead of yourselves, but the signs are looking good for Arsenal."
Keeping players fit is "crucial" for Arsenal
One potential downside of Arsenal's triumph in Lisbon was the withdrawal of centre-back Gabriel in the 84th minute, with the Brazilian limping off due to "discomfort".
While the defender's injury is not thought to be serious, Watts stressed the importance of Arsenal avoiding any further injuries to important players.
"The crucial thing now is keeping everyone fit. Gabriel limped off at the end last night - it doesn't look like anything serious, and Mikel didn't seem overly concerned in his press conference afterwards when asked about it, but that's another player limping off. It's just enough for fans to think 'what's happening here, not again'," he said.
"Hopefully that's not going to be the case. [William] Saliba and Gabriel last night were just at their monstrous best - they did not give Gyokeres a sniff. You could see they were up for it from the very first minute.
"I thought they would be because Gyokeres is very similar to Erling Haaland in terms of the way he plays, how strong he is, how he likes to just physically dominate defenders, but that's the sort of game that Saliba and Gabriel relish.
"They love playing against Haaland, and I thought they probably would relish it against Gyokeres and they'd want to prove a point, and they just didn't give him a sniff. He had absolutely no joy over them - they won every duel. Gabriel rubbed it in his face a little bit by mimicking his celebration when he scored; the pair of those two are excellent.
"As I said, Timber played well, Calafiori played well, and it just looked like a balanced Arsenal team."
"They'll be disappointed not to qualify from here"
Arsenal's victory lifted them up to seventh in the 36-team Champions League table, with 10 points from their five matches so far.
Projections suggest that that tally should already be enough to secure a top-24 spot and at least a place in the playoff round, but Arteta will no doubt have his eyes on finishing in the top eight and avoiding extra fixtures by going straight through to the last 16.
The margin for error in the Premier League title race is also razor thin given they are nine points adrift of Liverpool, making the upcoming busy festive period potentially make-or-break for Arsenal's ambitions this season.
"There's definitely very exciting signs for Arsenal fans at the moment from what we've seen in the last couple of games, but it is only a couple of games," Watts told Sports Mole.
"They need to do this basically until New Year. This is the level they have to hit. These are the results they have to consistently pick up if they want to get themselves back into the title race, and they're in a good position in the Champions League now.
"I think this was a crucial game - had they not got three points from that game, I think top eight would have looked pretty tough.
"Now, considering they've got what was on paper their hardest-looking fixture out of the way now, you look at the next three they've got to finish this Champions League campaign, I think they've given themselves a real, real good chance of getting top eight. I think they'll be disappointed if they don't make it from here, so that's another real positive from Arsenal."
Arsenal return to action away to West Ham United in the Premier League on Saturday, while their next Champions League outing is a home tie against Ligue 1 side Monaco.