Windows Performance Monitor might show "C2" but it isn't actually "C2" as VMware doesn't expose that capability to the guest OS, Please be aware while it is unlikely that this is causing your performance issue.
Affected VM’s virtual hardware: 11,14
Affected VM’s O/S: Windows 2012 R2, Windows 2019
The reason for Windows performance Monitor accounting all idle time to "C2" on VMs with HWv11 and above versions, we introduced support for MSR_HYPERV_GUEST_IDLE which will allow Windows to idle more effectively (refer the MSFT documentation on ITTD for more info)
Impact/Risk: Windows Performance Monitor might show "C2" but it isn't actually "C2" as VMware doesn't expose that capability to the guest OS, Please be aware while it is unlikely that this is causing your performance issue.
You can disable C2 states by adding below to advanced parameters of VM (VMX file)
monitor.disable_guest_idle_msr = TRUE