The Ivory Coast international's £72m move to the Emirates in 2019 has not worked out as intended, and he has fallen right down the pecking order in Mikel Arteta's squad this season.
With Bukayo Saka, Gabriel Martinelli and Emile Smith Rowe all preferred out wide to Pepe, the former Lille man has only made 21 appearances in all tournaments this term, contributing three goals and five assists.
Furthermore, Pepe has started just five Premier League games this term - the most recent of which came in October's draw with Crystal Palace - and he only has one goal and one assist in top-flight action.
After enjoying a strong Africa Cup of Nations, Arteta claimed to have seen a "different" Pepe since his return, but the 26-year-old has failed to break into the first XI on a regular basis.
With his contract due to expire in the summer of 2024, Arsenal are being tipped to cut their losses on Pepe this year, with the club highly unlikely to offer the attacker an extension.
The report adds that director Monchi is ready to walk away from the deal if Arsenal's demands are too high, but the Gunners are aware that they will take a significant hit on their record signing.
Pepe would supposedly arrive as Sevilla's replacement for Ocampos, and the La Liga side could try to drive the price down by including the Argentina international as part of a deal.
As is the case with Pepe, Ocampos is also due to become a free agent in two years' time but has still been a regular for Sevilla this term with nine goals and six assists in 39 outings.
The 27-year-old has also made the starting lineup on 22 occasions in the 2021-22 La Liga campaign, but he has only registered one goal and two assists in his last 11 league appearances and is doubtful for Wednesday's clash with Mallorca due to illness.
West Ham United have also been linked with a move for Ocampos but have allegedly been told that it would take a fee of £66m to prise him away from Sevilla in the upcoming transfer window.
The attacker has amassed a total of 34 goals and 15 assists in 129 games for Sevilla since joining from Marseille in 2019, and he was a regular starter for Los Palanganas en route to the 2019-20 Europa League crown.
Meanwhile, Pepe's 110 appearances for Arsenal have seen him register 27 goals and 20 assists, as well as winning one FA Cup in 2019-20, and the Gunners are reportedly open to offers of £25m for the Ivory Coast international.
Both Sevilla and Arsenal can confirm spots in the 2022-23 Champions League with midweek wins, with the Spanish side seven points clear of Real Betis and the Gunners hoping to complete the job in Thursday's North London derby with Tottenham Hotspur.