Symptoms

In some cases you may see on K2 application server CPU usage spikes, during which CPU is used for 90% to 100% by K2HostService process. When CPU usage reaches 90% and more, problems with loading smartforms start to appear, but SQL reports and other things not related with K2 working fine at the same time.
 

Diagnoses

Though this situation may be caused by variety of reasons and heavily depends on your workload profile (number of users and quantity, as well as complexity of deployed processes) the first thing to check in this scenario is that your K2 server is sized adequately in terms of hardware resources.

In case of virtualized environments you may want to make sure that vCPUs used by different K2 related servers in your environment do not share the same physical CPU (e.g. make sure that K2 application and SharePoint server vCPUs not share the same physical CPU).

Also do make sure that your K2 server hardware is inline with minimum hardware requirements stipulated by K2. Threat these requirements as minimum and keep in mind that base server OS, its roles and other application deployed on the server have their own requirements for hardware resources.
 

Resolution

First off you want to make sure that your K2 server hardware is meet (or preferably exceed as it always good to have some safety margin) recommended hardware requirements:

CPU
Minimum: Server with processor speed of 2.5 gigahertz (GHz) or higher
Recommended: 64 bit wherever possible, Multiple AMD64 or Intel x86_64 multi-core CPUs

MEMORY
K2 Server
Minimum: 4 GB
Recommended: 8 GB (especially if 64 bit servers are used)
SQL Server
Recommend at least twice the amount of K2 server as a starting point

Minimum and recommended K2 hardware requirements can be found here:
http://help.k2.com/onlinehelp/k2blackpearl/icg/current/webframe.html_Prereqs_Hardware.html

To better handle performance issue in your environment work towards setting performance baseline so that you will be able manage your K2 server resource capacity proactively. You may also obtain "Planning for K2 Performance and Capacity" document available at K2 Center of Excellence site which can be used for hardware sizing/capacity planning for K2.

Related links:
Performance and Capacity Planning - http://coe.k2.com/files/9035
K2 blackpearl Performance Testing - http://help.k2.com/files/1630