Sorry, I was distracted by the screenshot...
You demo seems to be exactly like mine, except for the BorderStyle (I had it at bsSizeable), different "words" in the long caption and having the label's WordWrap=true.
I could reproduce the issue on Linux Mint now (this was not possible with my demo). Switching BorderStyle to bsSizeable or bsNone or bsSizeToolWin, however, made your application work correctly, it does not work correctly for BorderStyle = bsSingle, bsDialog and bsToolWin.
Then returned to Windows and saw another issue here. At first: the form did not shrink to tightly enclose the label and the buttons (Width = 130), and after clicking on the "Long text" button it grew somehow but truncated all controls, the "Short text" button was below the bottom form border. Trying to resize the form at designtime I noticed that this is not possible... Had the idea to restrict the width of the buttons and specified Button1.Constraints.minWidth := 130 - the issue is gone (any larger value can be used, 129 makes the issue return again).
Quite mystical. No idea where that magic number 130 comes from, maybe related to the minimum form width of 120 px in windows (which exists also in Delphi)...