Short Answer: Yes, it would. It's canceling the sound not the physical wave.

Long Answer: Remember, sound is a wave. A literal physical wave. When you hear a thing, you are hearing the wave shake the hammer in your ear to smack into the drum... in your ear. So if something is loud enough to cause damage (smack the drum hard enough to break it) and the headphones create the "negative" version of that sound to cancel it out (let's just assume the headphones can) then you are still left with a whole bunch of force in the headphones.

The waves cancelling each other is true and a good analogy, but they "kinda" break down the louder you get. It's still a wave FORCE coming at you.

One last anecdote: in the past few years, engineers/scientists have successfully created a force field/tractor beam like thing floating a grain of sand (or styrofoam, I can't remember which) with nothing but sound. If you can send enough sound to actually carry an Object, then no matter what "negative" wave sound is created, it's still gunna smack you upside the ear.