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We previously operated a Windows Server 2019 Terminal Server with approximately 40 users connected concurrently. The server is equipped with 2 sockets, each with 24 CPU cores, and around 140 GB of RAM running on ESXi 6.7

While running Windows Server 2019, we experienced no performance issues — system responsiveness and user load handling were excellent.

Recently, we performed an in-place upgrade to Windows Server 2025. At first glance, everything works fine with a low number of users connected. However, when the user count reaches around 40, we begin to encounter significant issues with built-in Windows components.

Specifically, native Windows applications such as Task Manager, File Explorer, and Event Viewer become very slow to open and often crash. In contrast, third-party applications like Google Chrome, as well as Microsoft Word and Excel, continue to run without any major problems — they may take slightly longer to open, but remain stable and responsive.

Resource monitoring shows no obvious bottlenecks:

CPU and RAM usage are around 50–60%

Disk usage is within normal limits (e.g., 400 GB used out of 500 GB available)

No spikes or errors in the Event Viewer

Troubleshooting steps attempted so far:

Edited core count in msconfig: Increased from 1 to 32 cores

Adjusted CPU configuration in ESXi: Changed from 2 × 42 to 2 × 16 vCPUs (reverted and tested multiple configurations)

Moved user profiles from redirected to local

Created and tested a new local user on the terminal server

Limited antivirus CPU usage via GPEDIT: Capped AV scanning to a maximum of 5% CPU

Disabled Windows Indexing via GPO:

    Prevented indexing of public folders

    Prevented indexing of \\redirectuserfolders\*

    Prevented indexing of C:\Users\*

Disabled animations and visual effects via GPO:

    Disabled WDDM graphics display driver for Remote Desktop Connections

    Enabled maximum color depth limit (set to 16 or 24-bit)

    Adjusted registry key:
    HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\VisualEffects

Ran DISM and SFC scans; applied updated configuration files

Reinstalled VMware Tools

Adjusted hypervisor GPU settings:

    Increased video memory from 4 MB to 8 MB

    Increased 3D memory from 256 MB to 512 MB

Disabled Game features:

    Game Bar set to Off

    Game Mode set to Off
6 Spice ups
2

Server 2019 was rock-solid, suggest you continue using that until the issues with Server 2025 are fully fixed, or you jump to 2022 instead. Next, and most critical, UPGRADE YOUR ESXi ALREADY!!!

3 Spice ups
3

It’s interesting you want to move from a supported OS to a newer supported OS, but still run out of support ESXi. Almost 2 years out of support I might add.

It’s also never the best idea to do in-place upgrades, unless this is a last resort.

What was the rush to get to 2025?
Did you do any checks first to ensure there would be no issues with your apps, hardware or ESXi version, which doesn’t officially support 2025 anyway.

You’re probably not doing yourself any favours by running the latest server OSes on a non-supported hypervisor. I’d also wonder if your hardware is sufficient since your ESXi version is a number of years old, this suggests your hardware could be too.

Why would you edit it here?

This would also mean the VM has to cross NUMA boundaries, adding potential further issues.

But how, 1 socket 42 cores, 42 sockets 1 core, 1 socket 21 cores? This also has an impact.

Many of the things you have done are good to note, but the one thing that will help, is lower CPU/core count and a supported ESXi version.

1 Spice up
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It sounds like the in-place upgrade to Server 2025 introduced inefficiencies specifically with Windows native UI components under load, likely due to deeper changes in how the OS handles user sessions or graphics rendering. Since third-party apps remain stable and resource usage looks normal, this points to something OS-level rather than hardware or hypervisor-related. I’d recommend testing a clean install of Server 2025 in a separate VM to rule out leftover system artifacts from the upgrade, especially around session management and shell performance.

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Were all the applications and/or drivers installed in Terminal Server mode (change user /install & Change user /execute) ?

Then also why the need for RDS2025 instead of RDS2019 since it was stable ?
Also why ESXi 6.5 ??
Lastly why in-place upgrades and did you read on the issues pertaining to in-place upgrades for certain applications & features ?

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Unfortunately this is the answer. No one at MS cares about performance and we just have to live with it. The reason we have to do these upgrades is that Office 365 will only be supported on Server 2025 soon, and we can’t leave our customers in the lurch with an unsupported version of Office that doesn’t get security updates (which also unfortunately break things). Hopefully workarounds will emerge (like the ability to restore the older Win10 explorer – there’s a registry entry for that) that can restore some performance.

2 Spice ups
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In the OPs case, they’re running unsupported virtualization platforms, not designed with 2025 in mind, so whether MS care or not in this setup it wouldn’t help.

As far as being forced to 2025 for Office 365, I expect the results for a clean install would be different to an in-place upgrade.

But it has been noted on multiple posts before this one, 2025 has it’s issues and while MS may want to push people to it, Office 365 on server 2019 will still receive 3 years of security updates, it’s mostly new features that may not make it to server 2019 platforms, so you wouldn’t be in the lurch.

1 Spice up
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What do these have in common..oh…they utterly depend on group policy working correctly..which in 2025 it…doesn’t…often…

Have you ever looked at CVE’s for hypervisors? Pffft…
Yes, they need security updates too, there are hacks to back door VM’s and get into the server,
there are security updates to fix that…just saying…

1 Spice up
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You’ve already covered a lot in troubleshooting. Since the problem mainly affects native Windows components and not third-party apps, it points to issues introduced by the in-place upgrade and the unsupported ESXi 6.7 environment.

At this stage, it’s best to test a clean install of Server 2025 on a separate VM to rule out upgrade-related leftovers. Also, upgrading ESXi to a supported version is important — many such issues come down to compatibility gaps. If stability is critical, consider sticking with Server 2019 or moving to Server 2022.

1 Spice up
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Just saw this. No, it’s not the in-place upgrade. We have the exact same issue and my servers were built fresh. Task manager, slooooooow! Eventveiwer, slooooooow! Windows Explorer, slooooooow, clicking start menu, sometimes slooooooow!! I;m going to open a case with MS. We are doing the exact same thing as you, moving from 2019 to 2025. It’s a supported OS and it’s nice to have a Win11 look and feel, but these weird issues are starting to really annoy me. It’s not a load issue as it’s in pilot and i’m the only person on a host most often than not. We use Citrix, but it’s not that as i have a vanilla box without citrix installed and it’s worse over RDP than citrix. Something clearly not right with this OS. Hoping the CU update next week has some much needed fixes, but doubt it. We run on VSphere 8.

1 Spice up
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Hopefully, you didn’t build domain controllers on Server 2025??

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Absolutely. you are living on the edge there, my friend.

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(post deleted by author)

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Nope, not my area luckily

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Lucky for sure! Issues with 2025 as a DC are well documented here!

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We are having similar issues with Server 2022. RDS Performance is abysmal at best.

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Interesting, i was starting to regret not going to 2022, but sounds like same old. Thanks for confirming.

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2025 has a number of issues, so many people seem to be steaming ahead with it with no specific use case, but aren’t looking up known issues first.

I haven’t even set this up in my lab yet because of the known issues, which appear to be different for everyone.

For you specifically, it may be worth creating your own topic so people can help you troubleshoot, since your OSes are supported, this may be something different.

1 Spice up