Overheating can be caused by hardware issues, such as a faulty battery. However, in the vast majority of situations, it is the software that is to blame. The overheating problem you're having appears to be software-related, as it started after you installed a fresh update. So, once you install the iOS 11 update on your iPhone 7, this is most likely what happens.

Any app that uses a lot of your iPhone's battery is more than likely the same app that is causing it to overheat. Check your battery records for crashing apps in this regard. Any app that you don't use very often but that consumes a lot of energy on your iPhone might be crashing in the background.

Check the list of applications that are utilizing the most battery life in Settings->Battery-> Battery Usage area.

Any of these applications might be overheating your iPhone and should be uninstalled, reinstalled, or updated.