Yes—gels usually reduce flash output, but mainly because they absorb some wavelengths of light, not because they significantly diffuse it. Stronger gels generally cut more light than lighter gels, so a full CTO will reduce output more than a 1/4 CTO.

If you’re using TTL flash, the camera/flash system will usually compensate automatically by increasing flash output as needed. With very strong gels, TTL may not always be perfect, so you might still need a little flash exposure compensation.

If you’re using manual flash power, then you do need to compensate yourself by raising flash power, opening aperture, increasing ISO, or moving the flash closer.

So the short answer is: yes, gels reduce output somewhat, but they don’t behave like a true diffuser, and whether you need to adjust depends mostly on whether you’re using TTL or manual flash.