Duplicate files · Duplicates in iCloud Drive
How does the duplicate finder handle iCloud Drive?
Short answer: Yes. iCloud Drive has its own row in the Duplicates window. It compares files already downloaded to your Mac and lists exact copies to clean up; online-only files are skipped, so nothing is downloaded just to compare it.
Yes. iCloud Drive has its own row in the Duplicates sidebar, under On this Mac. It compares the iCloud Drive files that are already downloaded to your Mac and lists exact copies in sets, just like This Mac, with the same recommended copy, open and reveal buttons, and removal to the Recycle Vault.
Online-only files — ones stored only in iCloud to save space — are skipped, so nothing is ever downloaded just to compare it. See why online-only files are skipped.