To answer this question I feel I first have to address the underlying assumption in it - that being a global superpower in the colonial period should result in having a large landmass - when this is hardly the case for other European colonial powers today, namely Spain, the Netherlands, and arguably even France and Britain.

Then, to understand som peticularities of the Portuguese Empire and Portuguese colonialism. Unlike the other major colonial empires of Europe, for Portugal, the colonial empire never truly translated into great power ambitions in Europe, apart from short spurts of ambitions, like King Sebastian's failed campaigns in North Africa.

Rather Portuguese colonialism largely aimed for a commercial empire, mostly to the benefit of individuals within the Portuguese Empire, and largely driven by the ambition of individuals. Of course, this still happened with the consent of the king, and the Portuguese king did arguably show more interest in his empire than other European monarchs. But it is a stark contrast from Spain, where the empire was largely fuel for great power ambitions in Europe, and the ideological aspect of protecting catholicism took precedence.

Portugal in this manner built up a vast Asian network of colonies, aiming ot establish mare clausum of the Indian Ocean. But as a major colonial power, Portugal largely subsided from the 17th century and onwards. Traditionally, the Iberian Union has been a big aprt of htis explanation. From 1580-1640 the Spanish and Portuguese crowns were united, and the Spanish king made almost no effort in protecting Portuguese colonies from Dutch attacks. For decades, this effectively enabled the Dutch to pick off Portuguese colonies in Asia one by one without any coherent reprisal from their enemy. While Brazil and Angola was notably reconquered by the Portuguese, all colonies in Asia apart from Goa, Macau and Timor was lost by 1660. After this Portugal ceased to be a major power in Asia, and their expansion in Africa and America also largely stopped.

As such, the Iberian Union stopped Portugal from being a major global power. They never stopped to be a major European power, because they never were nor tried to be one in the first place. I hope this helps.