What people don't understand about the Tau is that they are effectively 'playing tall'. The Imperium is very big, yes, but extremely underdeveloped relative to its size. The Tau, although their territory on the map is small, are extremely well-developed and dense in terms of both population density as well as infrastructure, factories, and of course technology. Not only do they know how to terraform planets to be habitable, but they also build continent-sized space stations functioning as massive habitats and connecting the gaps in their empire.

Imagine the Imperium as a guy in Stellaris who conquered 80% of the galaxy, but now he has cripplingly massive empire size penalties, almost no research, and is heavily reliant on an increasingly rare supply of archaeo-tech weapons and and ancient relic resources to build them.

And then the Tau are some guy with like 10 systems whose doing some Knights of the Toxic God max-research cosmogenesis cheese run and has built a habitat and ecumenopoli with orbital rings in all of his systems.