Methods and systems to offload overlay network packet encapsulation to hardware

A physical network interface controller (PNIC) for a host computer, the PNIC comprising at least one processing unit and a non-transitory machine readable medium storing a program for performing packet decapsulation for an overlay network when executed by the processing unit, the program comprising sets of instructions for:

• receiving, from a hypervisor executing on the host computer, a mapping table associating at least one tunnel endpoint of the overlay network with virtual machines (VMs) in a set of two or more VMs executing on the host computer;
• decapsulating an encapsulated packet received from the overlay network and destined for a particular VM operating on the hypervisor executing on the host computer, by removing an overlay network encapsulation header comprising a particular tunnel endpoint address;
• determining that (i) the particular tunnel endpoint address in the overlay network encapsulation header matches a tunnel endpoint address associated in the mapping table with a particular VM address in the decapsulated packet and (ii) a destination address associated with the decapsulated packet is within a predetermined address range for a multicast address, wherein the particular VM is a member of a multicast group associated with the multicast address comprising at least one other VM in the set of VMs;
• and
• based on the determination, forwarding the decapsulated packet to the particular VM and the at least one other VM in the multicast group.