When would you use IAsyncEnumerable instead of returning a List or IEnumerable?

IEnumerable vs IAsyncEnumerable for streaming

Compare synchronous enumeration with async streaming and explain when IAsyncEnumerable helps with large or delayed data.

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TL;DR

IAsyncEnumerable lets a method return items asynchronously as they become available. I would use it when reading data from an async source and I do not want to load everything into memory first. A normal IEnumerable is fine for in-memory data. With IAsyncEnumerable, the caller can await each item and pass cancellation while the stream is being consumed.

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Async streaming, backpressure, memory usage, data pipelines, cancellation, and API boundaries.

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Why this question matters
Async streams are useful when data arrives over time or is too large to load all at once. This question checks whether the candidate thinks about memory and streaming boundaries.
IAsyncEnumerable lets a method return items asynchronously as they become available. I would use it when reading data from an async source and I do not want to load everything into memory first. A normal IEnumerable is fine for in-memory data. With IAsyncEnumerable, the caller can await each item and pass cancellation while the stream is being consumed.
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For example, if I process a large file or page through database results, IAsyncEnumerable can let me handle items one at a time instead of building a huge List. The trade-off is that the consumer must understand streaming semantics: errors can happen halfway through, cancellation matters, and resources may stay open while the stream is being read. It is not always the right return type for public APIs where materialized results are simpler.

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Details

Returning IAsyncEnumerable for small in-memory collections.
Forgetting cancellation during enumeration.
Letting DbContext lifetime end before the stream is consumed.
Ignoring errors that occur after partial output.
Assuming streaming always simplifies API behavior.

When would you use IAsyncEnumerable instead of returning a List or IEnumerable?

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