"Then you watched. You watched and couldn't do anything." Despite how levelly he says it, that horrifies Cloud on some level. It only horrifies him even more as Sephiroth utters those final few words. Not human enough to die. Combined with the knowledge that Sephiroth was trained as a living weapon so early in his life with no say, this lands a decisive blow against the foundations of his views on the man. If this is all the case, it makes Sephiroth another of Shinra's countless victims, if not the one hurt most grievously by them.

As for the quip...

He swore he just meant it sucked for the dragon to be in a head so full of chaos and static. He insists on that, though perhaps somewhere subconscious the self-deprecation was a lot more than that. Regardless of motive, how is Cloud supposed to respond to his former hero giving him such genuine praise and validation? Saying his future is one worth fighting for? Saying, with his whole chest, that he wished he was like him, a hot mess ex-SOLDIER and a nobody who landed on Shinra's shitlist? Glowing eyes go wide, he opens his mouth, but no words come out. His heart picks up its pace in his chest, and Cloud can only pray the slight heat he feels in his cheeks is not visible as something. This is the kind of thing he dreamed of as a young boy in the Nibelheim countryside. "I- huh." Is all he can manage, but the look on his face speaks volumes.

Perhaps this man with the blood of thousands on his hands was able to change. Or always was as he is now beneath his fucked-up circumstances.

Then, the hen shits on Sephiroth, and the floodgates are open. Too many emotions at once coalesce into a singular gesture.

A smile appears. A real one, faint but stark on Cloud's often-serious face...And he laughs, pointing his head down to try and hide it. It is a short, almost-chuckle, but laughter nonetheless, something Sephiroth probably has never heard directly from the source before. It softens his eyes, and makes him look, for a time, at peace. "Think she likes you."