During development of TINY METAL I ran into issues where large textures were only using R8G8R8A8, aka 4 bytes per pixel, instead of DXT1 or another compression format. I wanted these textures to use DXT1 or another compression format to save space so the full 32bits per pixel was un-usable.
In our case the solution was the pad the images outside UE4 to be multiples of 4 pixels. Note that using the in UE4 “Power Of Two Mode” padding offered in the texture settings did not allow the images to use DXT1. Instead I was forced to resize the images outside unreal before importing them.