In one embodiment, in-band operations data included in packets being processed is used to signal among entities of a virtualized packet processing apparatus. Using in-band operations data provides insight on actual entities used in processing of the packet within the virtualized packet processing apparatus. The operations data in the packet is modified to signal a detected overload condition of an entity that participates in communicating the packet within the virtualized packet processing apparatus and/or applying a network service to the packet. An In-Situ Operations, Administration, and Maintenance (IOAM) header is used in one embodiment, with the IOAM header typically including a new Overload Flag to signal the detection of the overload condition. In response to the signaled overload condition, a load balancer is adjusted such that future packets are not distributed to the virtualized entity associated with the detected overload condition.