Could if they have a known image close enough to the one they are targeting. Cloudflare does a great job of explaining "fuzzy hashing" when they announced CSAM scanning for all their customers nearly 2 years ago:
https://blog.cloudflare.com/the-csam-scanning-tool/
For example: the "Celebgate" photos and videos that were leaked and shared. Those could be tracked if their hashes were fed into CSAM, but any photos you take and share would need to first be intercepted or otherwise obtained and make its way into the CSAM database (or another database if one were being used). Apple would not be able to just scan for "gay erotica" or anything of the like.
It's amusing to me that so many people freely let gmail scan their emails and gave away their photos to FaceApp without even reading or thinking about their terms of use, but are worried about a feature that is literally available to any Cloudflare customer and is done by other services writ large.
I think a lot of the confusion comes from the other feature they announced which has several caveats that make it inapplicable to most (if not all) forum posters. "It's my phone!" doesn't generally apply to kids under 13 who are using an iPhone - it's almost certainly (with a few rare exceptions) their parent's phone and iCloud family account. Even if it is their phone, they are not old enough to enter into the legal agreements to use any services on the phone on their own.