diff --git a/.gitmodules b/.gitmodules
index 8cfdf100..dcaa9e95 100644
--- a/.gitmodules
+++ b/.gitmodules
@@ -1,4 +1,4 @@
 [submodule "src/test/java/com/flagsmith/flagengine/enginetestdata"]
 	path = src/test/java/com/flagsmith/flagengine/enginetestdata
 	url = git@github.com:Flagsmith/engine-test-data.git
-	branch = v3.5.0
\ No newline at end of file
+	branch = v3.7.0
\ No newline at end of file
diff --git a/src/main/java/com/flagsmith/flagengine/segments/SegmentEvaluator.java b/src/main/java/com/flagsmith/flagengine/segments/SegmentEvaluator.java
index a38ce3aa..cbfb741e 100644
--- a/src/main/java/com/flagsmith/flagengine/segments/SegmentEvaluator.java
+++ b/src/main/java/com/flagsmith/flagengine/segments/SegmentEvaluator.java
@@ -71,8 +71,27 @@ private static Boolean contextMatchesRule(EvaluationContext context, SegmentRule
       }
     }
 
-    return isMatch && rule.getRules().stream()
-        .allMatch((subRule) -> contextMatchesRule(context, subRule, segmentKey));
+    if (!isMatch) {
+      return false;
+    }
+
+    List<SegmentRule> subRules = rule.getRules();
+    if (subRules.isEmpty()) {
+      return true;
+    }
+
+    Predicate<SegmentRule> subRulePredicate = (subRule) -> contextMatchesRule(
+        context, subRule, segmentKey);
+    switch (rule.getType()) {
+      case ALL:
+        return subRules.stream().allMatch(subRulePredicate);
+      case ANY:
+        return subRules.stream().anyMatch(subRulePredicate);
+      case NONE:
+        return subRules.stream().noneMatch(subRulePredicate);
+      default:
+        return false;
+    }
   }
 
   private static Boolean contextMatchesCondition(
diff --git a/src/test/java/com/flagsmith/flagengine/enginetestdata b/src/test/java/com/flagsmith/flagengine/enginetestdata
index 7840a134..4b29dc77 160000
--- a/src/test/java/com/flagsmith/flagengine/enginetestdata
+++ b/src/test/java/com/flagsmith/flagengine/enginetestdata
@@ -1 +1 @@
-Subproject commit 7840a1349b601df3b6b4a089f40864f659801afb
+Subproject commit 4b29dc772a764364af2dd504ecefbdf74cf5473f
diff --git a/src/test/java/com/flagsmith/flagengine/unit/segments/SegmentEvaluatorTest.java b/src/test/java/com/flagsmith/flagengine/unit/segments/SegmentEvaluatorTest.java
index f7b23fd3..a11007ec 100644
--- a/src/test/java/com/flagsmith/flagengine/unit/segments/SegmentEvaluatorTest.java
+++ b/src/test/java/com/flagsmith/flagengine/unit/segments/SegmentEvaluatorTest.java
@@ -38,7 +38,7 @@ private static Stream<Arguments> identitiesInSegments() {
         Arguments.of(segmentMultipleConditionsAny(), oneIdentityTrait(), Boolean.TRUE),
         Arguments.of(segmentMultipleConditionsAny(), twoIdentityTraits(), Boolean.TRUE),
         Arguments.of(segmentNestedRules(), emptyIdentityTraits(), Boolean.FALSE),
-        Arguments.of(segmentNestedRules(), oneIdentityTrait(), Boolean.FALSE),
+        Arguments.of(segmentNestedRules(), oneIdentityTrait(), Boolean.TRUE),
         Arguments.of(segmentNestedRules(), threeIdentityTraits(), Boolean.TRUE),
         Arguments.of(segmentConditionsAndNestedRules(), emptyIdentityTraits(), Boolean.FALSE),
         Arguments.of(segmentConditionsAndNestedRules(), oneIdentityTrait(), Boolean.FALSE),