Why would our software run so much slower under virtualization?

I suppose we could divide reasons for slower performance on a virtual machine into two classes:

1. Configuration Skew

This category is for all the things that have nothing to do with virtualization per se but where the configured virtual machine is not as good as the real one. A really easy thing to do is to give the virtual machine just one CPU core and then compare it to an application running on a 2-CPU 8-core 16-hyperthread Intel Core i7 monster. In your case, at a minimum you did not run the same OS. Most likely there is other skew as well.

2. Bad Virtualization Fit

Things like databases that do a lot of locking do not virtualize well and so the typical overhead may not apply to the test case. It's not your exact case, but I've been told the penalty is 30-40% for MySQL. I notice an entry point called ...semaphore in your list. That's a sign of something that will virtualize slowly.

The basic problem is that constructs that can't be executed natively in user mode will require traps (slow, all by themselves) and then further overhead in hypervisor emulation code.

I'm assuming that you're providing enough resources for your virtual machines, the benefit of virtualization is consolidating 5 machines that only run at 10-15% CPU/memory onto a single machine that will run at 50-75% CPU/memory and which still leaves you 25-50% overhead for those "bursty" times.

Personal anecdote: 20 machines were virtualized but each was using as much CPU as it could. This caused problems when a single machine was trying to use more power than a single core could provide. Therefore the hypervisor was virtualizing a single core over multiple cores, killing performance. Once we throttled the CPU usage of each VM to the maximum available from any single core, performance skyrocketed.