This really depends on how much nesting you use. After all, you are allowed to use function results directly in expressions to improve readability. Both, code that does not use nested expressions (like assembler code), and code that uses too much nested expressions is hard to read. Good code tries to strike a balance in between the extremes.
So lets look at some examples. The one you gave in your question seems quite legit to me, so nothing to worry here. However, a line like
foo(bar(baz(moo, fab), bim(bam(ext, rel, woot, baz(moo, fab)), noob), bom, zak(bif)));
would definitely not be tolerable. Likewise, code like
double xsquare = x*x;
double ysquare = y*y;
double zsquare = z*z;
double xysquare = xsquare + ysquare;
double xyzsquare = xysquare + zsquare;
double length = sqrt(xyzsquare);
would not be very readable as well.
sqrt(x*x + y*y + z*z) is much easier to understand, even though it combines a total of six different operation in one expression.
My advice is to pay attention to what expressions you can still parse in your head easily. The moment you need to take a second look to grasp what a single expression does, it's time to introduce an additional variable.