i would say yes, as it seems his body kind of “shuts down”, he relaxes, and his brain creates dreams.

Depends on what you think of as “sleep” and what processes are involved. Does Data’s brain have brain waves that change to make him go unconscious? Is Data even “conscious” and what is “conscious” (there’s some debate about that on the show)?

He doesn’t sleep as a physical necessity like humans, for example. It is a programmed cessation of normal mechanical functions that includes a dream creation program, so it is still a form of sleep even if it does not serve quite the same function as a humanoid.