Should MySQL database be in dedicated server? The application has about 10 databases. Both application and databases are in the same server since is client does not want any time delay that could possibly occur if the database is in a dedicated server.

We have been experiencing application slowing down lately but when we check (after the users done for the day of course), everything works super fast. We have done load testing and everything seems fine which make me wonder if the lack of dedicated server takes up too much of CPU.
The argument against a dedicated server is invalid, if the microseconds that account for the delay when talking to a different server matter you would not be asking about MySQL.

But there is one thing you could check before going out and buying hardware: A good database is trying to utilize as much main memory as possible for caching. Make sure your system is not swapping memory out to disk when your application is running simultaneously on the same server.