No, it's not necessarily a red flag. The company might cut back on unprofitable businesses and reinforcing their profit making arms.
It is important to consider your own preferences, don't listen too much on others :) For example, some people thrive in companies that are doing extremely well, have lots of money for experimentation, there's not much financial pressure, etc. Some others (e.g. myself) like being dropped into crisis situations because they're interesting, you can learn a lot about people and every decision matters. Also, being a contrarian can help you to opportunities that you'd not get during 'peacetime'.
You can ask about job security during an interview. Many interviewers will be honest, and if they're not, you can still guess based on their reaction.
I’m curious about your perspective on being in a “crisis situation” (because I see what you mean about it being interesting) and what that requires. Can that be a 40 hour a week job? Or are you signing up for a job that’s the primary focus of your life? What has your experience been?
It it probably not a 40 hour a week job in the sense that it's on your mind all the time. But it's also not a 40 week job because you don't need to be around from 9-5 as what matters is that you make good decisions, therefore you need to prioritise your mental health a lot. In my case this meant stuff like going for a 2 hour long run in the middle of the day, because clearing my head was the best I could do for my work.
The problem with this attitude is that it is hard to transition to peacetime, normal stuff doesn't seem important (e.g. it is very hard to take a normal product decision that seriously if you've seen deep existential crises before).
A company I worked for went through a rather large crisis/reorganization shortly after I joined - similar to OP, I found it a very good opportunity to learn about both the field and the company. Fewer people, wider scope of responsibility/agency, and greater freedom to act. I was able to have conversations and do projects I wouldn’t have before, since the scope of the crisis led to a strong bias towards action and a willingness to take risk that didn’t exist before.
In terms of work/life balance, the stress was definitely higher afterwards, but we were very clear that reduced headcount meant that we simply could not do the same amount of work we were doing before and that working long hours would have no meaningful impact on what we could realistically get done. Leadership handled this well, and it helped that we had a sharp enough break that it was clear that we couldn’t just “buckle down” and continue as before. Can’t say working hours didn’t increase at the margins, and it definitely took more head space than before, but both the freedom to operate and the ability to make an impact made the work more enjoyable for me. It also helped that I worked from home, though - some colleagues worked from the office, and having to be in the room with the kinds of negativity that come with crisis would’ve made my experience much worse.
I’d definitely ask during the interview and get a sense of the company, but I wouldn’t necessarily write them off. Some depends on you as well - I was 3 months in at the company and did not get laid off, while others on my team/in my vicinity did.
One other thing to consider is your own personal risk tolerance - one reason I stuck around was because I was new to the field and considered it an opportunity to learn, and I could take the risk of finding myself unemployed again. If you’ve got a visa situation or a health situation or low savings and a family, that’s a different situation, but I’m a healthy single guy with savings, so I could take the risk for the right opportunity.
It is important to consider your own preferences, don't listen too much on others :) For example, some people thrive in companies that are doing extremely well, have lots of money for experimentation, there's not much financial pressure, etc. Some others (e.g. myself) like being dropped into crisis situations because they're interesting, you can learn a lot about people and every decision matters. Also, being a contrarian can help you to opportunities that you'd not get during 'peacetime'.
You can ask about job security during an interview. Many interviewers will be honest, and if they're not, you can still guess based on their reaction.