In my experience it works just fine https://github.com/bahmutov/sudoku-app/blob/main/cypress.config.js

component: {
    devServer: {
      framework: 'create-react-app',
      bundler: 'webpack',
      webpackConfig: {
        ...

@gray-kilobyte-89541 you don't use the "verbose" version where you can run custom code though, you're just providing an object with the config, in my version it's actually a method that runs and returns the final config

FWIW I couldn't get it to work with this:

import { defineConfig } from 'cypress'
import cracoConfig from './craco.config.js'
import { createWebpackDevConfig } from '@craco/craco'
//import { devServer } from '@cypress/webpack-dev-server'

const webpackConfig = createWebpackDevConfig(cracoConfig)

export default defineConfig({
  component: {
    devServer: {
      bundler: 'webpack',
      framework: 'create-react-app',
      webpackConfig,
    },
    specPattern: 'src/**/*spec.{ts,tsx}',
  },
})

got an error on launching cypress (see screenshot) but this seems to work:

import { defineConfig } from 'cypress'
import cracoConfig from './craco.config.js'
import { createWebpackDevConfig } from '@craco/craco'
import { devServer } from '@cypress/webpack-dev-server'

const webpackConfig = createWebpackDevConfig(cracoConfig)

export default defineConfig({
  component: {
    devServer(cypressConfig) {
      return devServer(cypressConfig, { webpackConfig })
    },
    specPattern: 'src/**/*spec.{ts,tsx}',
  },
})