Not arcade only, you can do it on console. Nah, it wasn't counter hit. Also, Counter hits don't increase damage, unless otherwise stated.
He started the combo with 2HS. Remember that more hits isn't necessarily mean more damage. It did so much damage because 2HS doesn't prorate. Meaning his damage was only being affected by the guard gauge. And he got several heavy hits (2HS, 5HS, MFL2) in the beginning of the combo, before the guard gauge could make a large impact.
If you want to see the difference proration can make try a combo starting with 5K, then try the same combo, but start it with 2K.