Since its launch, Xbox Cloud Gaming has only supported 720p game streaming. This was to save bandwidth and server resources. A 720p stream was not a massive deal for Xbox Cloud Gaming, as it mainly only worked on the small screens of Android phones and tablets.
However, with the possibility of Xbox Cloud Gaming soon being made available through browsers, an increase to the resolution cap is most certainly necessary.
According to Windows Central, "reports have suggested that Microsoft is planning to upgrade the Xbox cloud streaming servers from Xbox One architecture to Xbox Series X architecture over the course of this year, and we may have started to see some of the fruits of that labor."
In a screen capture from these trusted sources, we can see that the game is running at 1080p resolution, which is up from the standard 720p resolution. The update to the server hardware will also increase gaming performance and loading speeds. Improved performance and an increased resolution will make the games look and run even better on your mobile devices and any future devices that Xbox Cloud Gaming may support.
Since this is currently in the internal testing and development phase, there is no set date for when Xbox Game Pass Ultimate subscribers will be able to utilize the new architecture for their gaming streams. So as of currently, you will still have to deal with 720p game streams.