Annorax's ultimate goal was not to keep Krenim in power or restore them to it. It was to be reunited with his family.
The final scene on the time ship implies that building it was the cause of the attack by neighbors in the first place. The time ship has been erased and due to that timeline got
reset to the moment from before it went operational re-aligned accordingly, giving the impression of a reset. Disappearing lock of hair means that his family was alive back then (before building time ship, that is).
It follows then that, apparently when Annorax got his wish, maybe the time weapon was not as appealing as during the first iteration. Or maybe it was that he - as is implied in the link to similar question - remembered it, and advocated against building it again. Or maybe the time ship erased itself so completely that even the scientific breakthrough that allowed it to be build was gone, too. After all, it function was to "erase something from the timeline as if it never existed".
So, when the time ship was never built, the Empire suffered the normal fall (though it's not implied anywhere), and Krenim accepted that it was the natural order of things? And unlike the first time, they weren't attacked by their neighbors in coordinated effort? If everyone is against you, it's no longer paranoia but reality, where "shoot first, ask later" is the best policy.