How to Beat Sephiroth

To defeat Sephiroth, focus primarily on Cloud, utilizing Punisher-blocking to deal damage and fill Sephiroth's pressure gauge effectively. Equipping Elemental Materia with an element you wish to avoid on Cloud's armor, such as Fire for the first half of the fight, can mitigate incoming damage. Aerith should be used for healing and exploiting Sephiroth's elemental weakness with magic during his third phase.

Cloud Focus: Stick mostly to Cloud for offense.
Punisher-blocking: Use Punisher-blocking for good damage and to pressure Sephiroth. This is often more useful than Counterstance.
Elemental Defense: Equip Elemental Materia with an element like Fire on Cloud's armor to reduce damage from common attacks in the first half.
Aerith's Role: Use Aerith for healing when necessary. In phase three, use her magic to target Sephiroth's elemental weakness.
Final Phase Strategy: Wait out dark elemental attacks, then unleash magic with all characters. Command Tifa to draw attention while others cast spells.