I tested the proposed kernel and it solves the problem. I'm not sure if
it is appropriate for me to change the tag though or if that should wait
for a larger QA effort.

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https://bugs.launchpad.net/bugs/1602755

Title:
  Tunnel offload indications not stripped from encapsulated packets,
  causing performance overhead

Status in linux package in Ubuntu:
  Fix Committed
Status in linux source package in Xenial:
  Fix Committed

Bug description:
  Commit:
  
https://git.kernel.org/cgit/linux/kernel/git/torvalds/linux.git/commit?id=a09a4c8dd1ec7f830e1fb9e59eb72bddc965d168

  Description:

  tunnels: Remove encapsulation offloads on decap.

  If a packet is either locally encapsulated or processed through GRO
  it is marked with the offloads that it requires. However, when it is
  decapsulated these tunnel offload indications are not removed. This
  means that if we receive an encapsulated TCP packet, aggregate it with
  GRO, decapsulate, and retransmit the resulting frame on a NIC that does
  not support encapsulation, we won't be able to take advantage of hardware
  offloads even though it is just a simple TCP packet at this point.

  This fixes the problem by stripping off encapsulation offload indications
  when packets are decapsulated.

  The performance impacts of this bug are significant. In a test where a
  Geneve encapsulated TCP stream is sent to a hypervisor, GRO'ed, decapsulated,
  and bridged to a VM performance is improved by 60% (5Gbps->8Gbps) as a
  result of avoiding unnecessary segmentation at the VM tap interface.

  Reported-by: Ramu Ramamurthy <srama...@linux.vnet.ibm.com>
  Fixes: 68c33163 ("v4 GRE: Add TCP segmentation offload for GRE")
  Signed-off-by: Jesse Gross <je...@kernel.org>
  Signed-off-by: David S. Miller <da...@davemloft.net>

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