Anywhere there is a cone, there is also a "race" that the bearings sit in. The cone holds the bearings in place against the race. The picture you have posted shows the very definition of "pitted cone". As the wheel turns there will be increased friction when the bearings contact the pit. It will get larger and eventually the bearing will freeze in the pit. Even if it's just for a moment it will cause increased friction on the race.
Cones are very inexpensive relative to the cost of a new hub and the wheel building labor it takes to replace it, or relative to the cost of a new wheel. I would absolutely replace it.