As far as I can tell, when you add a file to an iCloud folder, it indexes it locally, uploads it, and the index sticks around even after the file is evicted from local storage.

So for example, right now I searched for an address I haven't used in 10+ years. On my computer, Spotlight immediately found a PDF file that wasn't stored locally. However, I added that file from my computer, so it's in the index (presumably). If I do the same search from my phone, nothing is found, though searching the filename itself still works.

It would be nice if the index data itself were transmitted between devices, but, you take what you can get and it's pretty impressive as it is.