https://en.wikipedia.org/wiki/Venona_project
Basically, in 1995, the USGovt revealed they had in-depth knowledge of soviet intelligence from the middle of WW2 to 1980. The detail was so good that not only did few know about it, but ti was used to implicate spies in the US so well that it could never be revealed in court and often forced prosecutors to limit their knowledge of how such intelligence was gained in order to protect the secret. Famously, as many protested the Rosenbergs trial, it was revealed after VERONA was uncovered that not only were they spies but they were unrepentant in their behavior.
Reading about all of the people subsequently tagged within the VERONA transmission (some of which are still classified and progressively rolled out over time) it seems that McCarthy really might have known how flooded with communists the US Government really was in the 50s.
It's VENONA, not VERONA. "VENONA" is the US decryption project. "VERONA" is shouting the name of the city where Romeo and Juliet is set. I would also point out that VENONA did and does not implicate both of the Rosenbergs completely. It implicates Julius. Ethel's participation and knowledge is still unclear, and there are things in the transcripts which make it seem that her role was minor if anything.
As for McCarthy, he had no idea about the realities of Soviet spying, and his accusations were fairly unrelated with reality. The conspiracies he alleged were far larger than what VENONA shows actually taking place. VENONA does not validate McCarthy. It does, however, go against those who said that all attempts to target spies (including the Rosenbergs) were just "witch hunts."
So neither McCarthy was right, nor were many of his critics. The reality is somewhere in between. VENONA shows there were spy networks but they were relatively containable and much smaller than someone like McCarthy thought. The US government was not really "flooded with Communists" in the 1950s. There were a few Communists here and there, a few spies here and there (and being a Communist is not the same thing as being a spy). Many of the strongest charges by the Red Scare groups (which includes McCarthy but is more than him, i.e. HUAC and other committees and organizations), such as the presence of vast conspiracies to coordinate entire industries (i.e. film) along the lines of Soviet ideology, were entirely baseless.
It has been argued (by Sen. Patrick Moynihan in his book Secrecy: The American Experience) that if VENONA had been declassified earlier, it would have kept some of the Cold War ideological extremes (on both left and right) from being so disconnected with reality. I'm not sure that is the case, but it is an interesting hypothesis. As it was, neither were right. McCarthy is certainly not vindicated by it, anymore than anyone ranting about domestic Islamic terrorist threats today is vindicated by the fact that there are, indeed, some Islamic terrorist threats in the world. If I accuse you of being a terrorist, it does not make me correct that there are other terrorists in the world, if you are not actually one. That just makes me an opportunist and a demagogue, which is what McCarthy was.