Northern Ireland have long struggled to put away lower ranked opposition, but losing to a side ranked 140th in the world and containing just four full-time professionals was a major blow.
O'Neill was scathing in his post-match media briefing and Southampton midfielder Davis confirmed there was more of the same for the players following their shock 3-2 reverse.
"Michael was furious, and that's understandable," he said.
"Some words were said and they are to stay in the dressing room. Honestly, I am finding it really hard to talk about it so soon after the game, I am just so frustrated.
"Is it any different for me as captain? No, I think just generally as a player I wasn't at it. I was about half a yard off.
"I don't think there were any positives, it was a totally unacceptable performance. We let down Michael and the staff, and the fans who came out and gave us such a good backing.
"It's strange how you go from such a mature performance against Russia and you come in today and it looks as if we had never played with each other before.
"I don't think we underestimated Luxembourg. We know ourselves if we want results we have to be on it every single game and this time we weren't on it."
Martin Paterson was equally downbeat.
The Huddersfield forward was arguably the only Northern Ireland player to come out of the match with any credit, putting his side ahead with a crisp finish in the 14th minute before things went badly wrong.
It was the 26-year-old's third international goal, and second in three matches following his winner against Russia, but he was in no mood to celebrate.
"We're not happy. The performance was under par for us over the past couple of internationals and we didn't perform to that level," Paterson said.
"There will be people and press who say that we were under par and we can't really disagree with that.
"It's hard to defend it after a result like. I would love to defend it and say it wasn't a waste of time but after a performance and a result like that, getting beaten by Luxembourg, we haven't really got a leg to stand on."