There's a built-in function, sgml-pretty-print, but it's really slow. When running it on some large XML files, it's locked up Emacs for minutes for me. Running xmlstarlet on the same file was instantaneous.

Install xmlstarlet:

brew install xmlstarlet

Navigate to the file in a dired buffer, and hit ! (dired-do-shell-command) to run a shell command on the file. Type: xmlstarlet ed --inplace.