And it's worth noting that the Aldmeri would not have even sat down to negotiate the White Gold Concordat if they were in a position to crush the Empire through military means alone, so they were clearly hurting as well--their failure to take Hammerfell was probably down to the damage their forces took during the Cyrodiil campaign.

Titus Medes II was actually pretty smart to negotiate the Concordat. The parts of the Empire still under his control were almost entirely populated by Men, whereas the Aldmer are Elves--they live longer and breed slower than men do, so will recover slower from battle losses than the Empire does. Given a few decades the Empire can overrun Summerset--Medes is playing the long game here.