When I ran a Muslim realm with a capital in Marrekech, and put 1 castle, 1 city, and 5 mosques there, I felt like I was the most powerful guy in the world. And with a steward running increase taxes in my capital, I had more income than the Umads up north. In 800 CE. With bad technology.
Proper use of Islam's mechanics will make you incredibly powerful. The AI never makes good use of Islam's perks, but humans can power game the crap out of it. For maximum fun, you can run a Muslim realm with a culture that allows raiding.
Islam is balanced weirdly in CK2. The AI is fairly well balanced with Islam. I see the Umads and Blobassids disintegrate enough of the time to convince me that Islam is fine under AI control. One decadence revolt won't kill a big Muslim blob, but decadence revolts and factions and adventures will get most of them in the end, even if it takes a couple of centuries. But humans can stay at 0% decadence more or less 95% of the time, boosting income and morale while gaming Open Succession to get the best possible heir every time. Sure, you eat tyranny when imprisoning decade sons who are not worth the piety cost of shaping up, but with a properly built council, the tyranny isn't that big of a problem.
I tend to play Islamic states only as bizarre heresies for an additional challenge. Being Sunni is too close to an "I Win" button at most start dates.
"The Catholics of Western Europe are planning a Crusade against us. What will we do, Caliph?"
"Well, I've got 3000 piety from holding upgraded mosques and my holy wars, so why not run a few invasions. I figure we can take out France, Germany, and Italy before I need to take a break for more piety."
"But what of the pagans?"
"Do we have military organization 4?"
"No."
"Then why are you bothering me? Go research military organization 4, and we can curb stomp the idiot pagans up north."
"But if they convert..."
"Who gives a flying fart if they convert? I have caliphal subjugation. I'm going to go all Samuel L Jackson on their posteriors no matter what religion they are. I'm pretty sure I read that in a hadith somewhere that I shall strike down upon them with great vengeance and furious anger."
"And India?"
"Look, even our historical counterparts could conquer India. You think a bunch of pacifist Jains with uber demesnes are going to stop me? We'll just steal the technology from the Buddhists. And the Hindus? Their holy order cannot help them now."