Power BI developers encounter performance bottlenecks when working with massive datasets due to memory constraints and data size limits. In Pro licenses, datasets are capped at 1GB, while Premium plans allow larger datasets but are costly. Power BI developers often need to implement data reduction strategies like aggregations, incremental refresh, or summarizations, which increase development time. DirectQuery provides real-time data but depends on database performance, often leading to slower queries. These limitations make handling large datasets challenging, requiring developers to possess expertise in optimization techniques to maintain functionality while ensuring dashboards remain responsive.