Use both, in layers. Run emulators and simulators on every pull request for fast, cheap feedback on logic and basic UI, then validate high-risk flows on real devices before release. Real devices are needed for performance, sensors, biometrics, camera, Play Store install flows, OEM quirks and real network conditions. A device cloud saves you buying and maintaining a handset lab and runs Appium, Espresso or XCUITest suites in parallel. Pick devices from your own analytics for the most-used models and OS versions rather than trying to cover everything.

Sources: Kobiton guide, Sauce Labs, TestMu AI