Mac storage basics · Developer tools
Why does Xcode need so much free space to install or update?
Short answer: Xcode must expand a compressed download, briefly needing room for both copies — far more than its final size. Clear DerivedData and old simulators, then retry.
Xcode downloads as a compressed archive and has to expand it, so for a while it needs room for both the download and the expanded app — much more than its final size. Updates also replace the old copy only at the end.
If an install fails for lack of space, clear Xcode's own data (DerivedData, old simulators and runtimes) and other big items first, then retry. Downloading only the platforms you need keeps the install smaller.