@JeremyKahan is correct, it's like mixing synchronous and asynchronous code. The synchronous code always executes first.
Basically, you can see it by adding a couple of console.log()
function getProfilePresentOrNot(profileName) {
  var flag = 0;
  cy.get("li>div>div>span").each(($el, index, $list) => {
    if ($el.text().includes(profileName)) {
      console.log('Setting flag')
      flag = 1;
    }
  });
  console.log('Returning flag')
  return flag;
}
This will print in the devtools
Returning flag
Setting flag                // because cy.get(...).each(...) ran later
You could use a custom command
Cypress.Commands.add('getProfilePresentOrNot', (profileName) => {
  cy.get("li>div>div>span")
    .invoke('text')                                  // all text from all spans
    .then(allText => allText.includes(profileName))  // returns the result of .includes(...)
})
which must be used like this
cy.getProfilePresentOrNot('someprofilename')
  .then(isPresent => {  // true or false
    if (isPresent) {
      ...
    }
  })
or if you are absolutely sure that all li>div>div>span are present in the page, you can still use a function but switch to synchronous Cypress code (i.e jQuery).
function getProfilePresentOrNot(profileName) {
  const allText = Cypress.$("li>div>div>span").text()
  return allText.includes(profileName);
}
which can be called like this
const isPresent = getProfilePresentOrNot('someprofilename')
The custom command is safest because on a production web page there are lots of things that can fail your test because the element can't be found immediately, and Cypress asynchronous commands have built-in mechanisms to avoid the problems.