How to mix text and formulas in a single cell in the Wolfram Cloud Notebook?

It's correct that we don't have a full-blown typesetting editor in the Wolfram Cloud yet. That's one of our longer-term projects.

For now, you could use the special "Inline InputForm-based input" we added recently: Press Ctrl+Shift+1 and you get an input field where you can type an expression in InputForm (e.g. x/y^2) which will turn into its typeset equivalent once you press Enter. You can go back to edit mode by clicking it. This will be added to the "Insert" menu soon so it's easier to discover.

Other alternatives that might suit you in certain cases:

• You can use "Evaluate in Place" (Cmd+Enter on Mac / Ctrl+Enter on Windows) if you want to evaluate something inline.
• You can convert a whole cell from InputForm to StandardForm (Ctrl+Shift+N on Mac / Ctrl+Alt+N on Windows); Ctrl+Shift+I / Ctrl+Alt+I to go back to InputForm.
• You can take some (typeset) output and copy it into another cell, e.g. by clicking it (if you get the click-to-copy overlay) or by selecting the cell bracket and pressing Cmd+C / Ctrl+C and then pressing Cmd+V / Ctrl+V while the cursor is inside the other cell.

I described some of these things in greater detail in the blog post about 1.50 and 1.51.

Answer written at the time of $CloudVersion: 1.53.0.1 (November 5, 2019)

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My guess is that interactive work with inline cells is not supported in the web browser front end yet.

You can see that inline cells are known and rendered well:

CellPrint @ TextCell[
   Row[{"Test ",Defer@Integrate[x^2,{x,0,1}]}],
   "Section"
]

but once this cell is printed you can't edit or even move selection inside the Input inline cell.

So in order to create those cells you can use a CellPrint @ cell approach.

At the end the most convenient way is probably to develop your notebook on desktop Mathematica and upload to the Cloud.