Real Madrid's performance is currently improving and I think in terms of percentage, Real Madrid's chances in the Champions League this season are increasing after previously they were doubted when they were down.
Real Madrid's performance does look a little better and they can beat Atalanta to improve their ranking but Real Madrid's current position cannot be said to be safe they still have to face 2 more matches to be able to advance to the next round if Real Madrid can win the 2 matches they still have a chance to rank in the top 8 but if one of the clubs in the top 8 currently such as Lille, Brest, Inter, Aston Villa, Arsenal and Leverkusen lose points in the next 2 matches.
Madrid has also just won the Intercontinental Cup and this is their first trophy this season and with this will make Real Madrid excited to win the next trophies.
Of course, their performance will improve because their players are getting fit. It's been a long time that Real Madrid have experienced such poor performance due to injury. Winning Atalanta gave them hope of qualifying to the next round and it will also motivate them to win the rest of their matches. It hasn't happened in history that Real Madrid, the title favorite will not qualify to the round of 16, and it will not happen this season.
I also believe while it was 90% because of the injuries, the 10% was because they didn't had people having chemistry and adapt to each other that easily. This isn't just about Mbappe, which is a big dela, but adding him and getting him to get used to playing in this new system was a big deal, and that was of course an issue, but at the same time I believe that we are seeing other players who replaced injured players had some trouble adjusting and adapting too.
Hopefully, with less injured players now, we are going to see them do better, and won't face the same issues for long term. I am sure that they are going to do better and be in the last sixteen without a doubt, probably will go even further than that as well, there isn't a reason why they can't win it all, just because they did badly in the group stages, doesn't mean they will lose the whole thing, they can turn things around and win the whole thing.